The Consultative Approach: Ensuring Homeowners Success and Community Stability

The lending industry’s approach to providing mortgages to homebuyers has changed dramatically throughout its history.

The first mortgage loans were issued in the U.S. in the late 1700s. The practice became common in the mid-19th century, when lenders only lent up to 50% of the purchase price, and the loans had to be repaid in three to five years.

The Great Depression brought on the creation of the 30-year mortgage when – for the first time – a government agency was established to step in and address a crisis in the mortgage market. The Homeowners’ Loan Corporation (HOLC) purchased over a million loans that were in default, restructuring the terms into 15- and 30-year payback periods, successfully preventing over 800,000 mortgages from defaulting.

Homeownership ballooned from the 1940s through the 1960s with the availability of more reasonable terms and the advent of mortgage insurance programs. Lenders were still cautious, however, and a 20 percent down payment option became the norm to protect the lenders’ investment. Lending was assiduous in assuring borrowers could meet their obligations.

All that changed in the early 2000s when some lending institutions started valuing mortgage creation as the profit center. Mortgage creation became less about the payback and more about the churn.

New regulations have placed requirements on lending institutions to ensure mortgages are correctly structured, and borrowers are financially able to pay off their mortgages over the long term.

These regulations are helpful and need to be balanced to ensure the sustainability of home ownership and the impact homeownership has on improving a community.

Consultative Mortgage Lending

The mortgage industry’s focus is helping to create solid communities. Lenders must become more invested in the borrower’s financial well-being and the sustainability of the local real estate markets.

This requires a consultative selling approach, where loan officers work with borrowers to understand their needs and goals and act more in an advisory rather than just adopting a rigid sale posture. A loan professional needs to offer financial education, including providing the customer with the knowledge and confidence they need to make an informed decision about the type of mortgage they are acquiring.

This needs-based selling approach is a crucial emphasis at Certainty Home Lending, an approach that envisions a long-term relationship with the customer from the borrower’s first home purchase through life events and changes that may include refinancing, renovation loans, home equity line of credit or a new mortgage to take that next step to a move-up home.

(See our HELOC eligibility requirements and restrictions.)

Building a relationship over time with the customer is coupled with building a solid relationship within the community – a core value at Certainty Home Lending.

Just as homeownership has been proven to bring stability to neighborhoods, Certainty Home Lending believes good lending practices have the same impact and is committed to providing robust and resilient lending practices that ensure the future of the communities where they live and work.

Contact us today to learn more!

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