Thanks to mortgage marketing magic, non-prime mortgages are considered the “new and improved” version of the old subprime mortgages. And though there are noticeable changes to the new version of subprime mortgages—like more responsible underwriting— there are still downfalls from both a client and broker perspective. As such, exploring alternatives to non-prime loans is a great idea.
What is the best alternative and how can mortgage brokers assist their clients to meet their financial goals?
The Difficulty With Non-Prime Loans
Non-prime loans have effects on both lenders and borrowers. Non-prime loans are an expensive option for your clients to pursue, and they aren’t a sustainable solution for your bottom line.
Smaller market
Non-prime mortgage marketing still has difficulties hiding the dark past of the subprime housing crisis of 2007. Borrowers are more educated on the dangers and perils of mortgages if they can’t afford them, and new regulations naturally minimize the eligible market for non-prime loans. Due to a mix of both circumstances, there is a decline in the non-prime market. Mortgage brokers feel the impact as a significant source of their loan originations has shrunk or disappeared.
Riskier clients
Those who qualify for non-prime loans are borrowers who are unable to land better terms. This is because non-prime loans are often geared toward homebuyers with past credit events like a:
- Foreclosure
- Bankruptcy
- Short Sale
- Late payment
- Collection
- Charge-off
Though no one, lender or borrower alike, wants to see history repeat itself, the fact is: it’s possible to fall into old, bad credit habits. Regardless of how non-prime mortgages are advertised, they can still be a risky investment.
Poor long-term plans
Non-prime loans should only be looked at as a temporary solution to an immediate need. Non-prime loans usually have higher-than-average interest rates and ancillary fees, making them expensive options for consumers. Additionally, mortgage brokers cannot sustain themselves with non-prime loans as well as they can with prime. By encouraging clients to bring their credit up to “prime status,” both parties can reap the rewards. After all, your clients just need a little help before they can qualify for a loan with better terms.
The Best Alternative to Non-Prime Loans
Life happens. Not everyone has perfect credit. Still, the best alternative to non-prime loans will always be prime loans. The only way to land a better rate is to help rebuild your client’s credit foundation. However, it’s not always easy for mortgage brokers to encourage their clients to get to the next step financially. What if we told you there is an alternative that most mortgage brokers don’t know about?
The alternative many mortgage brokers are leveraging is becoming a credit repair specialist to help clients rebuild their financial wellbeing, pro bono.
You provide a financial roadmap to help mortgage clients navigate the road to a better credit score, and close a better loan that gives a high return on investment for you and the client!
It’s a win-win for everyone involved.
By helping your clients regain control of their finances, you’re also building their trust. When they are able to qualify for a prime loan, you are the mortgage broker that will come to mind first. You client lands their dream home, and you’ve landed a better paycheck.
Learn how you can add credit repair services to your mortgage business, and remain compliant.
