How Loan Officers Can Convert Renters into Buyers: Part 1 - Overcoming Credit Issues

Recently we have seen an uptick in mortgage rates. They are still VERY low, but it reminds me NOT to forget my purchase business and referral partners. I have been very active during the refi boom to stay in touch with this side of my business.

A great way to do that is to bring your best referral partners some business. And first time buyers in the form of converting renters to buyers has never been more important than now.

So why do people and families rent? Here is what I have found:

• 
  Poor Credit
• Low amount of savings for a down payment and closing costs
• Assume that they can’t buy

Today let’s discuss Poor Credit and how to overcome this challenge to make Buyers out of Renters.

In 2020, renters in the US had an average credit score of 638. High-end rentals had an average score of 669 and low-end rentals had an average score of 597.

The first thing I noticed is that I can do a loan for either one of those scores. Most Prime conventional lenders have a 640 cut off and I have FHA lenders that go down to 500 in some circumstances. So on the surface, poor or challenged credit should not be an issue. Perceived poor credit by renters can make them hesitant to reach out to lenders. This is why you need to reach out to them. 

Now say you find a client willing to work with you and you find that the score combined with their overall profile will not generate an FHA or Conventional Approve/Eligible DU response. Make sure you work with a Broker that can get MANUAL FHA Underwrites approved. If you get a Refer/Eligible, you still have a chance if you have the right lenders in your portfolio. 

Check out Page 258 of the FHA Handbook

All of our approved credit vendors have an option to request guidance on what to specifically do to raise your client’s score. USE THAT TOOL. You can give direct advice to your client on what they need to do to raise their score. Do that and follow up with them as you would with any other lead and you will have a client for life and probably someone to sing your praises to other friends and neighbors in their rental complex that could also use your help.

For more information on how we help our clients at Innovative Mortgage, please reach out to us.

And Stay Tuned for PART 2 of our series on converting renters into buyers - Ways to Access “Free” Down Payment Monies for Renters.

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