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3 Ways to Help Your Clients Bridge the Affordability Gap
In today’s economy, there’s a lot of factors that greatly impact the real estate market—especially for buyers looking to purchase a home. Whether it’s interest rates, the demand of homes versus what’s available, the location of the property, or personal wages and credit scores—there’s a lot that goes into whether a buyer can actually purchase the home they want. And sometimes it’s up to real estate experts to help them navigate the very common affordability gap.
So, what is the affordability gap, and how can we help our clients? As the prices of homes increase based on housing demand, the amount of money a new buyer can be approved for can waver greatly. When a buyer’s wages no longer align with the price of real estate in the areas they are looking to live, or their debt to asset ratio becomes less than ideal, the affordability gap for them grows. As real estate professionals, here are three ways you can help your clients bridge the affordability gap.
1. Keep it Real
There’s nothing worse than wanting something you just can’t have. This goes for home buying too. We all want to live in the home of our dreams—perfect location, perfect layout, perfect style, and perfect price tag. Unfortunately, when buying a home, many buyers need to waiver on some of their must-haves in order to make a purchase. As a real estate professional, it’s your job to keep reality at the forefront of their expectations. Based on their pre-approval rates, and their top priorities for a new home, it’s your job to help them find listings that make sense. This may mean:
- Showing homes outside of their ideal location
- Showing homes with less square footage
- Adding fixer-uppers to the list of potential purchases
- Navigating their finances to help them reduce some debt and increase assets
Your top priority with clients navigating the affordability gap should be having an honest discussion up front to maximize your time together. This will lessen frustrations when you begin the home searching process.
2. Manage Debt and Time
Even in the midst of the COVID pandemic, people are buying and selling homes. This is great for the real estate industry, but can be hard for those new buyers right on the edge of the affordability gap. With home prices skyrocketing in many areas across the country, this can make it harder for certain buyers. Your potential clients may be wondering if it’s even worth the expenditure right now. A recent article on themreport.com states, “As home prices keep rising and the affordability gaps keep widening, the American housing market is leaving many more at a loss at to what to do.”
For real estate professionals, sometimes the best advice—and not always the easiest, is to tell your clients they need to focus on managing their debt and then circle back. What does this really mean? It will be unique to each client based on their current financial situation, but in many cases it means to wait 3-6 months while reducing credit card debt to improve credit scores, or taking time to save up money to put towards a down payment. If debt consolidation or wage appreciation isn’t an option, it may mean the buyer needs to lower expectations and look for homes that are more in line with what they can be approved for at the time.
3. Provide the Right Financial Support
Lenders are experts for a reason. The good ones know how to assess the entire financial picture of a potential buyer, and offer options to help them meet their unique goals. Some financial options they may present to their clients are bridge loans, grant eligible properties, and debt consolidation. According to betterthanloans.com, bridge loans, “…help fill an interim gap when borrowers are in need of funding properties. This type of loan is also known as a swing loan, gap financing, interim financing or short-term financing. Bridge loans are designed to help bridge the gap between a borrower’s current lending situation and lining up more advantageous future investments.”
There are also grant eligible properties available to home buyers. These include bank-owned homes and sometimes new construction. By doing the right research, and discerning which lenders offer support or incentives for certain purchases, you can more effectively present options to help your client find a home within their means.
However, sometimes what it takes is focused debt consolidation to make ends meet. This may mean advising clients to pay off a certain percentage of debt, or save up to have a higher amount for a down payment, etc. Again, lenders are experts in this area, and the good ones will look at each client’s unique situation and help them create a tangible plan of action to get them approved, and in their new home as soon as possible.
Velocity Title Keeps You Moving Forward
At Velocity Title, our experts have years of unmatched experience helping clients close on their new homes. It’s our job to make the final step in the home buying process as streamlined, informative, and easy as possible. See how Velocity Title can keep your clients moving forward by clicking here, or contact us today.