With so many people in or approaching retirement who are looking to buy a right-sized home, move closer to family or relocate for other reasons, there’s a big market opportunity with the Home Equity for Purchase product. One key avenue into that market is through developing relationships with new homebuilders. This past January, I attended the International Builders’ Show’s H4P session in Orlando and was encouraged to find that builders are more aware and interested in the H4P program and the growing market opportunity among older homebuyers. Based on my own experience as an H4P specialist, loan officers who wish to work with homebuilders as a core part of their sales strategy need to be prepared to wear many hats.
For a traditional mortgage lender to be valuable to a builder, they need to be available when needed. They also need to have exceptional customer service, as getting loan applications through to the closing in a smooth and timely manner is imperative. The biggest value a HECM lender can bring to a builder is creating homebuyers.
The H4P program, when promoted properly, helps convert prospects into buyers. And eventually, as more and more older Americans discover the program, it will create a whole new market of buyers. Much of this market will comprise people who wish to move into a new home that’s right for them—such as one that has newer amenities, is low-maintenance or offers one-floor living—but they worry that if they buy a home using their cash or a traditional mortgage, it could jeopardize their financial future. An H4P loan can make it easier for them to purchase that new home and obtain the lifestyle and financial security they’re looking for in retirement.
If a builder rep introduces the HECM concept to a prospect and they are excited by what they learn, it’s advantageous for you to reach out to the prospect as soon as possible and teach them about the H4P while they’re eager to learn more. Once a HECM homebuyer goes under contract, hold the buyer’s hands during the lengthy homebuilding process. After the early excitement wears off, there is a lot of time for homebuyers to second-guess their decision to buy the home and how to pay for it. So it’s important to keep in touch, even when there is not a specific reason to do so.
Building Strong Relationships
For an H4P lender, it isn’t enough to get a loan application through the pipeline to closing without any hiccups. While doing that is very important to retaining a homebuilder relationship, it’s only one of the responsibilities you’ll need to manage. The following is a list of industry professionals and key influencers you must work with and educate in order to properly do your job and become a valuable partner to a builder—long before you actually have a loan application to start processing.
The Builder’s Marketing Team: Teach them to effectively market the H4P in collaboration with a licensed originator who can educate and work closely with their prospects.
Settlement Coordinators: Teach them about the required timing and paperwork—especially the timing related to Certificate of Occupancy (CO) issuance.
The Builder’s Preferred Title and Settlement Company: Teach them about the unique features of the HECM loan closing, title requirements and timing.
Construction Managers: Teach them about the CO processing time and what’s required in the process.
Financial Planners: Offer to speak to the potential homebuyer’s trusted advisor and explain the benefits of financing with an H4P.
New Home Sales Consultants: Teach them how to best position the H4P purchase option. For example, they might position their pitch: “Are you considering purchasing with cash, a conventional mortgage or a Home Equity Conversion Mortgage that has a flexible repayment feature?”
The key is to switch up your marketing efforts, take advantage of the educational tools your training and marketing teams provide, and build strong relationships with these industry professionals and key influencers. By educating them on the opportunities of the H4P product, you may be able to reach more customers.
As more homebuyers, key influencers and industry professionals become aware and educated about the H4P, we may see this product play a much greater role in the HECM marketplace in the near future. Pursuing H4P business with new construction builders is time-consuming, and after you’ve done the work, there is a long delay before you see any commission. However, if you commit to it, this part of the business is very lucrative and personally rewarding. I feel immense satisfaction when I help my customers achieve a better retirement lifestyle than they thought was possible. Better yet, they’re doing it in a financially responsible way.