Going deep to earn the business of Hispanic homebuyers

As the 2019 convention nears for the National Association of Hispanic Real Estate Professionals (NAHREP), panelists weigh in on the growth of the Hispanic market, and how agents and mortgage professionals can capitalize on the business afforded by Hispanic first-time homebuyers.

Hispanic homebuyers account for more than 62% of the U.S. net increase in homeownership according to the 2018 State of Hispanic Homeownership report, but even though data from the Census Bureau reveals that the Hispanic homeownership rate has grown to 47.1% in 2018, it’s still well below the national average of 64%.

The actual homebuying scenario isn’t all that different for first-time homebuyers across all demographics; Vanessa Montañez is the vice president of sales and business development manager, national strategic markets at U.S. Banks, and says the biggest hurdle to first-time homebuyers—Hispanic and non-Hispanic—is the inability to save a significant amount of money upfront. Hispanic homebuyers, however, face additional hurdles.

Mortgage and real estate professionals who want to do business in this market have to understand how to qualify everyone from a seasonal worker to a DACA program member to someone coming from a country of origin where credit isn’t readily available. Buyers not only come from all walks of life, but are also at various stages of a generational transformation, from new immigrants to second-generation first-time buyers, and are experiencing various levels of assimilation. Originators and realtors must commit to understanding these dynamics.

“You have to understand the credit profiles you're going to come across, the financial dynamics, and make a commitment to understanding how you have to educate and coach and lead first time homebuyers, which is really what you're taking—you're taking a first time homebuyer specialty approach to a market and understand that you have the right knowledge, that you have the right team around you, that you communicate really well. Those are the things that I think really drives success,” said Jason Madiedo, CEO of Alterra Home Loans.

Montañez said that mortgage originators and real estate professionals should also understand that when working with the Hispanic market, they’re often going to have to prepare a plan for buyers who aren’t ready to buy. Follow-ups with these prospective borrowers aren’t just to stay top of mind; they’re to ensure progress on that specific plan.

“You want them to be accountable, too . . . because you’re also a coach and a mentor and also their accountability partner,” Montañez said.

Lenders, too, have to be able to accommodate various credit profiles, and it’s not easy to create a streamlined, efficient operation for all these different types of loans to serve a demographic that represents a huge opportunity in the market due to its size and homeownership differential.

“It creates a little bit higher manufacturing costs, because you need a manufacturing process that can facilitate not just that borrower that's complex, has thin credit, that may or may not want a digital mortgage experience,” Madiedo said. “For a mortgage company, being able to straddle between all those sorts of ways into applying for a mortgage or getting mortgage is not that easy. And so I think that's what ends up happening is, people get left behind, they don't get help. They find it too difficult.”

Alterra closes anywhere from 6,000-7,000 loans a year. Seventy percent of that production is to Hispanic consumers, and 70% of that production is to first-time homebuyers, and there’s a lot of overlap between the two. Mortgage originators like to tout their commitment to homebuyer education, but that means different things in different communities.

Traditionally, Madiedo said, mortgage companies have addressed homeownership education is by sourcing (“training, hiring, recruiting, stealing from other mortgage companies”) talent that is passionate, well-versed, and often of the same ethnicity as their target market, to go and work arm and arm with the real estate community on educating consumers. It’s a slow process, partly because it goes deeper than simply teaching people what their money can buy.

“If you come from a family that never owned a home, or never had generational wealth from owning a home, there's some holes there that I think you see that really are more educational,” said Madiedo.

The assumption that larger lenders and brokerage networks are going to capture this growing segment of the market is understandable, but it’s not a given. In fact, Madiedo says that independent and smaller business have a competitive advantage to working with Hispanic buyers because a greater amount of handholding and care is required for most of these borrowers.

“When you look at the entire market, you're going to get all these walks of life and so you're going to have to take that approach,” he said. “Smaller lenders are much more much better positioned than a larger lender, because larger lenders are looking to create massive efficiencies in their workflow and their manufacturing process, and some of these loans are somewhat exception based, and so this is where the smaller lenders thrive.”

As the number of Hispanic households are projected to increase by 4.6 million by 2025, according to Harvard’s Joint Center for Housing Studies, housing professionals who can connect with these buyers and communities now will be tapping into a powerful thing.

“What you want to do is build authentic relationships and just treat the borrower like you want to be treated because everything starts with the family as the nucleus,” Montañez said.

Montañez says that word of mouth is the best way to stay sustainable and viable in your business, and the only way to obtain that type of business is to be authentic and give honest information to the borrower that’s correct for their circumstance.

“If you're giving the best service to that borrower, and giving them the best rate, and holding their hand from start to finish, whether it's meeting with them at their house because they can't make it to your office or going to that closing office, the effort that you put in that relationship will pay for itself tenfold,” Montañez said. “Having extra marketing and tools, it is a plus, but really, it comes back to that customer service . . . because the rest are just tools and tchotchkes, extra stuff.”

Although the market is growing, Madiedo says there simply isn’t enough talent to go around for that to be the only way to reach buyers moving forward. Although he hopes that immigration will continue to the U.S., he thinks where the most growth will occur is in the homeownership of U.S.-born Hispanics, since they absorb information differently as they assimilate.

“Hispanics are hungry for homeownership, and as they assimilate more, they're going to be more apt to go out and seek the information and educate themselves a little bit more, and that portion of the demographic is going to continue to grow,” he said.