Have you ever noticed what cars, furniture, homes and appliances have in common? They're all primarily sold with the help of financing options – loans. Understanding what these industries have in common makes it easier for us to understand what makes them different, and from a sales perspective will allow us to improve our sales technique.

Let's imagine for a moment that we are in the market for a new couch. This weekend we'll head over to the local furniture store to look and see what's available. When we arrive at the store and peruse around, we notice how furniture prices significantly vary. So we start by wandering through the store looking for items within our purchase price when we begin to notice that every single price tag has two numbers listed – the sales price, and the monthly payment price if we were to use a financing option. Well this is interesting...

My first inclination in walking around was to find items within my budget, and stick to that area of the store. Yet all of a sudden I've come to find that there is a whole new world of couches that, though they don't fit my purchase price budget, definitely fit my monthly spending budget. I was unknowingly boxing myself into one corner of the store when half the building can make financial sense!

Can we see the relationship here? How often does an individual box themselves into remaining a renter because what they imagine to be required for buying a home is something far beyond what they actually need? If we ask 10 people at random what they think is needed to buy a $250,000 home what do you think they'll say? $40,000-$50,000 in down payment? 750 credit score? $3,000 a month in mortgage payments?

The reality is that when it comes to the majority of loan programs available to first-time buyers, down payment will typically be similar to first, last and security for renting while the monthly mortgage payment will be equal to or less than the cost of rent. Now our clients just need help to see this reality for themselves in the same way they do when shopping for a couch, phone or car. 

Let's stick with the $250,000 home to use as an example; our prospective buyer is under the impression that it is more affordable to rent this home than to buy. Now we know that on average a home like this will rent for $2,250/mo., and in order for our client to move in they will need the standard three months' rent upfront reflecting first, last and security, which totals $6,750. This would mean our client is in a position to put $6,750 down on a home and pay $2,250/month for as long as they live in the property. 

Here is where having a good working relationship with a mortgage lender becomes so important. To help your client determine whether it is more financially sensible to rent or buy this property, your lender can show them what it would take to buy as a first-time homebuyer. As it turns out in this scenario, they qualify for low-down payment programs that require as little as 3% down. Since the going interest rate for this client at the time is in the 4's, their total monthly mortgage payment after factoring in taxes, homeowners insurance and mortgage insurance would be less than $1,800.

Now a home that might be typically  advertised as "Own This Home for $250,000" could be more attractively worded as "Own This Home for $7,500 Down and Less Than $1,800/mo.! "Think that might turn a few heads your direction?

Interested in connecting with me? (three options)

1. Do you have a real estate topic for our next blog? Send us a message at [email protected]
2. Want to join me for lunch? E-mail [email protected] and let's get something on the calendar!
3. Looking to grow your real estate business by leveraging key mortgage concepts? Join us for our Elevate conference and RSVP to [email protected]. Our next event is October 26th, 2017 at the Marriott Courtyard in Boynton Beach!

 

The views of this blog, "Your Morning Shot" podcast, and on this site in general are solely those of the authors, Matt Weaver (NMLS-175651) and Zack Lewis, and do not express the views or opinions of Finance of America Mortgage. This is not a commitment to lend. Restrictions apply.