“Our 203K production has skyrocketed; we have seen a huge increase in that side of the market” said David Margulies, executive vice president of global sales at 5-Star Lender American Financial Resources (AFR).
“We have such a comfort level with renovation loans and everyone in our renovation department has a particular edge to their experience.”
Damon Richardson, HomeStyle program specialist at AFR, added that the company’s diverse staff is able to answer questions outside the realm of loan origination. “We have a staff member here who has a construction background and can read between the lines. He has a clearer understanding of issues that come up with home renovations. We know what questions to ask in the beginning versus at the end.”
Aging inventory, rising home values and increased home improvement spending are all fueling the renovation loan market. The indicators reflect a natural evolution for a lending industry looking at different products to offer homeowners.
So, how does one build its 203K and HomeStyle
“The first thing a mortgage broker needs to do is cultivate realtor relationships,” said Richardson. “This is the first place you want to go, you can provide with a platform for all the properties they are having a hard time moving...If you can help them make that sale, you are going to make their business stronger, and if you are the lending partner enabling them to do that, that’s going to maximize your potential.”
“These products weren’t created for mortgage companies, but for realtors,” said Margulies. “The realtors are where you want to focus. They will do the work for you. Realtors are going to be able to filter the information to the consumer and sell the dream.”
The government-insured loans allow homebuyers the opportunity to buy and fix up a property without exhausting their personal savings. Instead, they can purchase a property and tie in whatever costs to make required repairs or desired updates to one 30-year fixed loan.“Buyers think, ‘I love this house. It has everything I want, but it has olive green carpet and gold appliances,' and the buyers typical don’t have the out-of-pocket money to make the improvement,” said Margulies. “That’s where you can use a 203K to buy the property and do the work.”
With an ever-stricter regulatory environment and the economy improving at a sluggish pace, the mortgage business isn’t getting any easier. One kind of product, however, seems to be gaining steam – renovation loans.