The real estate market has always experienced peaks and valleys, but the current climate is something we’ve never seen before.
In 2020, increased demand and record-low interest rates, decreased inventory, and the safety concerns related to showing a home during the pandemic combined to create a challenging environment.
Buyers today often must make above-asking-price offers just to get a seller’s attention, and high-sale prices have many people worrying about the future of their investments.
But even in this strong seller’s market, there are ways credit unions can support their members:
PROVIDE PRE-APPROVALS
In addition to cash, home buyers are better equipped if they have a bona fide pre-approval letter in hand prior to making an offer. Around 90% of mortgage banking organizations, credit unions included, don’t offer pre-approvals – partly because they require an investment in underwriting resources. The conversion rate on pre-approvals, however, is more than 50% from pre-approval to funding, compared to 20% when a buyer has simply been pre-qualified.
IMPROVE TECHNOLOGY
A core competency of all credit unions is personalized service. That being said, members today increasingly want more self-serve options along with that personal touch. Improving technology so people can not only apply for a mortgage online, but also submit supporting documentation to verify income and assets, is a game-changer. Buyers must act quickly in this market and giving members more access to the information they need helps them make a competitive, timely offer.
MARKET SERVICES
Mortgage has not been historically something that a lot of members have gone to their credit union to obtain, so there’s a bit of an awareness problem. Credit unions have originated only about 7% of all U.S. mortgage loans every year for the last decade, despite increased demand and numbers of people joining credit unions.
Educating members on how to best structure their assets and finances for a home purchase is a great first step. But you need to ensure your members know you offer mortgages. A shotgun marketing approach creates awareness, but as the market shifts, targeted marketing will help credit unions find serious mortgage candidates. There are artificial intelligence tools that analyze consumer behavior and identify people who are actively looking for a home. Working with these third-party data sources allows credit unions to connect members with the products they need in a cost-effective way.
HAVE THE RIGHT PRODUCT SUITE TO CULTIVATE REALTOR RELATIONSHIPS
Credit unions that cultivate relationships with realtors are more likely to be referred to buyers as recommended lenders – if they have a well-rounded product offering. The first thing a realtor will ask is, “What products do you offer?” And, if the response is a portfolio of conventional products, the conversation may not go any further. It is important for credit unions to provide a variety of mortgage products. Government lending products like FHA, VA, and USDA, represent a large share of the market. If a credit union doesn’t have the right product for a realtor’s client, the realtor isn’t going to make that referral.
Credit unions are well positioned to serve members in this seller’s market. It’s a captive market and members want to feel like they belong. Taking the time to assess your technology and mortgage product offering, ensuring you can offer bona fide pre-approval letters and educating members that you offer mortgages, are great first steps to enhancing your mortgage business.
To learn more, listen to our most recent podcast on the topic.