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In today’s housing market, with its shortage of homes for sale, will sellers look poorly at a buyer making an offer tied to obtaining a mortgage requiring a low down payment? Not so, according to a recent survey done by Redfin of more than 800 of its real estate agents.
A larger down payment may help but it does not necessarily seal the deal over an offer tied to less money down. Based on Redfin’s experience, a down payment of 5% or less ranks second most popular among home sales.
Most sellers are more concerned about the potential buyer’s ability to get approved for their mortgage not the amount of their down payment. In most cases, regardless of the down payment, the seller and Realtor depend on the lender to quickly determine if a buyer will qualify for any needed financing.
In a highly competitive housing and lending market, lenders need have the capability to gather consumer application information and make a loan determination quickly. Sometimes they need the decision within hours to help Realtors and buyers close their deals. Otherwise, they’ll move on to lenders that can deliver within their timeframe.
This requires that the process enables quick decisions and the lender has an appetite to take the risks associated with doing so. Technology can surely help.
You can build it, like loanDepot, at a cost of about $80 million, or you can look to utilize existing applications and technology that offer such integrations and services. Either way, lenders need to get there…and soon.
Meanwhile, don’t overlook the technology needed to ensure your making a complete, accurate, quality, and compliant loan. Low down payment loans and those originated online pose some additional risks.
Just as the investment in application and processing technology is well worth it (and now required), so is the time and investment in a secure, quality control program. These investments will definitely pay big dividends in the future.
Low down payment loans have made their place in the housing market. They are accepted by sellers, Realtors, and buyers. Don’t miss out on lending opportunities by not offering them because of technology or risk.
