How Credit Optimization Can Help Increase Homeownership

It’s frustrating when a client doesn’t qualify for a mortgage. They tell you this great story about their credit history, income, and assets, but they don’t get approved when you run their file after receiving their documents. Whether they weren’t honest about their details or they didn’t understand what’s required to qualify for a mortgage, it’s frustrating for all parties.

Consumer-facing credit scoring modules aren’t always accurate and don’t consider the same factors mortgage credit scores do, leaving these borrowers frustrated and mortgage professionals without an addition to their pipeline.

Normally, these clients would just walk away and continue their current housing situation or turn to rent, basically eliminating them from your pipeline. What if there was a way to keep them in the pipeline AND turn them into a closed file quickly?

Options for Non-Qualified Borrowers

Borrowers who don’t qualify have a few options, some of which are obvious and are likely the ones most real estate agents and mortgage professionals use:

• Use credit optimization: Credit optimization gives clients real solutions they can implement immediately or in the near future to fix their credit scores, allowing them to qualify for mortgages and keeping them in your pipeline. The precise recommendations with likelihood scores within the CreditXpert Platform allow the lender and borrower to prioritize what will make the biggest impact and their credit score.
• Try again in six months to a year: Many real estate professionals suggest that unqualified clients save more money or increase their income and try again in six months to a year. While this can be a viable option, it does not keep these clients in your pipeline. However, the CreditXpert Platform and the actions of optimizing credit do instill trust between lender and borrower – they may not be ready now, but they will come back to you when they’re ready.
• Find other solutions to homeownership: The most common solution is to rent or continue living with relatives, or whatever their current housing situation is. Credit problems can seem overwhelming and impossible to fix, so they just assume it wasn’t meant to be.

Credit Optimization is the Top Solution

As you’ve likely guessed, credit optimization is the top solution. It makes you seem like the “hero” because you show them how they can improve their credit, which allows them to buy a house much sooner than any other option allows.

It’s not an overnight solution, but it’s certainly a faster option than sending them off on their own to try to save money and fix their credit. 73% of borrowers can improve their credit score by 20 points in just 30 days, or less in some cases. Most consumers either don’t know how to fix their credit or have false beliefs about what will fix it, making it harder to purchase a home.

Giving borrowers that value-added service, showing them that you care about more than just “closing the deal” to make money, makes you the “go-to” mortgage professional in the area because you help what would be unqualified borrowers buy a house.

How Credit Optimization Can Help Borrowers

So, how can credit optimization help?

Fortunately, it doesn’t involve calling the credit bureaus for each client, asking what they can do to fix their credit. That’s what mortgage professionals used to have to do. It was too time-consuming and not always accurate because you had to rely on human input.

Today, using CreditXpert, professionals can run hundreds of scenarios within minutes, allowing you to help your borrowers understand what they can do to fix their credit. The solutions CreditXpert offers aren’t humanly possible to calculate or configure in the short amount of time the program can process the data.

Within minutes, your borrower will know what credit score they can achieve if they take the suggested steps. Here’s how that helps borrowers:

• Loan approval: The most important factor is they may be able to get approved for the loan you originally had to turn them down for simply because they fixed their credit score.
  • Lower interest rates: Higher credit scores usually allow borrowers to qualify for a lower interest rate. If the debt-to-income ratio was the reason they didn’t initially qualify, a lower interest rate and monthly payment could be just what they need to qualify.
• Higher loan amounts: A lower DTI also leaves more room for a higher loan amount, which may keep borrowers in your pipeline longer if they know they may qualify for their dream house if they optimize their credit.
• More loan options: Borrowers with better credit scores may qualify for better loans, such as conforming loans, versus subprime, which naturally comes with better rates and terms.

How Credit Optimization Can Help Loan Officers and Real Estate Agents

You probably think credit optimization focuses only on the consumer, but that’s not the case; lenders and real estate agents benefit, too.

• Lenders: Investors want non-risky borrowers. If you work with your borrowers to increase their credit scores, you show that you lend to non-risky borrowers, which may result in higher profits. That’s not to say investors won’t invest in riskier loans, but lenders‘ profits aren’t as high.
• Real estate agents: As the buyer’s agent, you are at the lender’s and borrower’s mercy. If the borrower doesn’t have the credit score to qualify, you potentially lose the deal. But if they use credit optimization, they can remain in your pipeline and close on the house in just a few months rather than immediately.

Credit Optimization Benefits Everyone

Credit optimization can benefit everyone involved in the real estate transaction. The borrower is at the top of the chain, as they have the most to gain—a place to live—but lenders and real estate agents also benefit.

Credit optimization isn’t only for borrowers with “bad” credit; it can work for any borrower who wants to maximize their borrowing capability and minimize their interest rates and fees. Whether there are several factors a borrower must fix or only one or two, the outcome can be one that benefits everyone involved.

To learn more about Credit Optimization and CreditXpert Platform, join one of our live demos!