Why These Agreements Matter in Today’s Real Estate World

When you’re in the market for a new home, understanding your relationship with your real estate agent is essential. One of the key elements of this relationship is the Exclusive Buyer-Broker Agreement. This legally binding contract sets the expectations for both you and your agent. As of August 17, 2024, new federal legal requirements have made these agreements mandatory for all real estate agents who use the MLS (Multiple Listing Service). So, what does this mean for you as a homebuyer?

Whether you’re buying your first home or your fifth, this agreement offers clarity, protection, and peace of mind in an otherwise complex process. Let’s break down what you need to know—so you feel confident and empowered as you step into the world of real estate.

  • Buyer-Broker Agreement: A legally binding contract that ensures your real estate agent is fully committed to representing your best interests.
  • Transparency & Protection: The agreement outlines responsibilities, clarifies expectations, compensation, and ensures your agent works in your best interest.
  • New Legal Requirements: As of August 17, 2024, signing this agreement is mandatory before viewing homes, and buyer’s agent commissions must be negotiated upfront to sign.
  • Benefits for Homebuyers: Provides clarity, access to resources, and legal protection during your homebuying journey.
  • Work with Your Lender Early: Involving your lender early helps you understand financing options, including how to cover your agent’s commission if necessary.
  • Options for Paying Agent Commissions: Explore alternatives like seller concessions, adjusting the sales price, or using cash reserves if the seller won’t cover the fees.

What is a Buyer-Broker Agreement?

Whatever you want to call it, an Exclusive Buyer-Broker Agreement, Buyer Representation Agreement, Buyer Agency Agreement, or Buyer Agent Agreement, etc., they’re all the same. At its core, a Buyer-Broker Agreement is a legally binding contract between you (the buyer) and your real estate agent. Think of it as a mutual promise—a commitment that they will represent you, free from conflicts of interest, with your best interests at heart, and in return, you agree to work exclusively with them. It’s all about clarity.

What’s Changed with the NAR Settlement?

As of August 17, 2024, due to an antitrust lawsuit, the National Association of Realtors (NAR) was a part of, federal law now mandates that an Exclusive Buyer-Broker Agreement must be signed before an agent shows any property. Previously, this wasn’t required in every state, but now it’s standard practice nationwide.

One of the significant changes is that your agent’s commission may no longer be paid by the seller’s agent. Instead, you’ll negotiate with the seller to cover your agent’s fee, which could affect your overall offer and negotiations. Additionally, listings on the Multiple Listing Service (MLS) no longer display the buyer’s agent’s compensation, so your agent will need to gather this information for you directly from the listing agent.

While this might sound like an extra layer of complexity, it’s designed to ensure transparency and fairness in the real estate process—so you always know who is working for you and how they’re being compensated.

Why Should I Sign A Buyer-Broker Agreement?

In today’s real estate landscape, transparency is crucial. With a Buyer-Broker Agreement, both you and your agent are on the same page regarding responsibilities and expectations. It can be comforting to know that your agent isn’t just opening doors—they’re actively protecting your interests, making sure you don’t overpay, miss important timelines or details, or fall into common traps during the homebuying process.

But there’s more. Many agents are self-employed and rely solely on commissions for their income. By signing this agreement, you’re ensuring that your agent is compensated for their hard work and dedication. After all, you want an agent who is as committed to helping you succeed as you are to finding the perfect home.

You might hear the terms “real estate agent” and “real estate broker” used interchangeably—but they’re not quite the same thing. Your real estate agent is the one who helps you view homes and works directly with you during the buying process. A real estate broker, on the other hand, has more advanced education and licensing. They often oversee multiple agents and manage real estate offices.

In some cases, your agent might also be a broker. If not, they work for one. Either way, rest assured that both are there to ensure your homebuying journey goes smoothly.

Why Work with a Real Estate Agent?

  • Contracts and Support: Agents assist with disclosures, contracts, and deadlines in today’s regulated environment, guiding you through every step to reduce stress and provide peace of mind.
  • Market Expertise: A real estate agent offers deep local market knowledge, helping you find the best properties and advising on fair market prices.
  • Objectivity: Agents offer an unbiased perspective, helping you meet your goals within budget and avoid emotional attachments when buying or selling.
  • Time-Saving: With MLS access and industry connections, your agent quickly identifies properties that fit your needs, saving you countless hours.
  • Negotiation Skills: Your agent negotiates to get you the best deal, whether it’s lowering the price or securing favorable contract terms.

Your agent is a key player in your real estate transaction, alongside your lender. We’re here to guide you in making one of the biggest financial decisions of your life.

Call today! We’re happy to discuss how we can support you!

Key Elements of a Buyer’s Agent Agreement

When you sign a Buyer’s Agent Agreement, it will typically include the following key components:

Term Length: The agreement will specify how long you’ll be working exclusively with your agent. It could be for one home showing, 30 days, 90 days, six months, or another timeframe that fits your needs. You can always sign another one if you’d like. This ensures that both you and your agent are fully committed for the duration of the homebuying process.

Termination Rights: No one likes the idea of “breaking up,” but if things aren’t working out, the agreement will spell out how either party can end the relationship. Make sure you understand the conditions under which the agreement can be terminated, such as notice periods or potential compensation owed to the agent.

Exclusivity: By signing this agreement, you’re agreeing to work solely with your agent or their brokerage. If that sounds daunting, don’t worry—it’s all about ensuring your agent can focus on giving you the best service possible. 

Compensation: Traditionally, the seller pays both agents’ commissions. However, that’s not guaranteed, and you may need to negotiate or contribute toward your agent’s commission if the seller doesn’t cover it. Your lender can help you understand financing options for this. More on that later.

Property Specifications: This section lays out what you’re looking for in a home—such as price range, neighborhood, and type of property. It’s a way to ensure your agent knows exactly what you need and keeps their searches within your criteria.

Agent Duties: Your agreement will outline your agent’s responsibilities—from finding and showing homes to handling offers, negotiating, and following through until closing. This is where you set the tone for communication and what you expect from each other.

Pro TIP: Let’s look into down payment assistance programs to help with your financing!
Whether you are the one needing to pay agent fees, or not, we can search for opportunities for you to save money!

Benefits of an Exclusive Buyer-Broker Agreement for Homebuyers

At first you might wonder why you should sign this agreement. Isn’t it just another formality? It’s much more than that—it’s a crucial step to ensure that you and your real estate agent are aligned. Here’s why it benefits you:

  1. Clarity and Transparency: From the beginning of your relationship, the agreement outlines what services your agent will provide, so you know exactly what to expect.
  2. Your Interests Come First: Your agent is legally bound to act in your best interests—whether that means negotiating better terms or ensuring you don’t overlook any potential issues during your homebuying process.
  3. Protection: Both you and your agent are protected under the agreement. This means that if any legal issues arise, the terms of the contract will help clarify each party’s responsibilities.

Work With Your Lender Early!

But here’s the good news: you don’t have to figure this out alone. Your lender is a key player in helping you understand all your financing options, even before you sign the Exclusive Buyer-Broker Agreement. By working with your lender early in the process, you can get a clearer picture of how your financing could work—including how your agent’s commission might be covered.

Paying Your Real Estate Agent: What Are the Options?

We know that paying your agent’s commission can feel like one more possible daunting cost in an already expensive process. When you’re juggling earnest money deposits, down payments, and closing costs, the idea of covering one more fee might add another layer of stress—especially with a challenging housing market.

For many buyers, the ideal scenario is having the seller pay your agent’s commission. This can be a major relief. Depending on the market and the specific property, seller concessions—or contributions from other interested parties like builders, agents, or lenders—could cover your agent’s fees, leaving you with fewer out-of-pocket expenses.

What Happens if the Seller Refuses to Pay Buyer’s Agent Commission?

Don’t worry, you’ve got options. If you do need to cover agent commissions, don’t panic—your lender can help you explore options for managing this expense.

Five Options to Handle Buyer’s Agent Fees:

  1. Seller Concessions: This is the ideal scenario where the seller agrees to cover your agent’s commission.
  2. Increase the Sales Price: You can raise the home’s purchase price and ask the seller to pay your agent. Your appraisal will need to support the higher price.
  3. Adjust Your Down Payment: Lower your down payment and use some of the funds to pay your agent’s commission.
  4. Use Cash Reserves: If possible, you can pay your agent directly from your savings.
  5. A Combination: Sometimes, the best option is a mix of the above—work with your lender to find a solution that works for your finances.

It’s important to have open discussions with your agent and lender to fully understand these options and decide what works best for you.

Your lender also plays a crucial role in building confidence with the seller’s agent. Throughout the homebuying process, your lender should be in close contact with the seller’s listing agent, making sure they know that you’re a serious and qualified buyer. This can go a long way in reassuring the seller that by accepting your offer, they’re choosing a buyer who’s financially stable and ready to close. When your financing is solid and your lender is advocating for you, sellers may be more inclined to assist with agent fees or other concessions to seal the deal.

Final Thoughts: The Value of a Good Homebuying Team

When it comes down to it, a great buyer’s agent does far more than open doors. They’re your advocate, your expert, and your negotiator—someone who is there to help you make one of the biggest financial decisions of your life.

By signing an Exclusive Buyer-Broker Agreement, you’re ensuring that your agent is just as invested in your success as you are. You’re establishing trust, clarifying expectations, and ensuring that your interests are represented every step of the way.

Ultimately, the goal is to work together with your agent, lender, and other key players to make sure you’re set up for success—both financially and emotionally—as you navigate the homebuying journey.

Reach out with any questions, or to get started on your homebuying journey!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. 

Understanding the Influence of School Districts on Property Values and Home-Buying Decisions

When you set out to buy a home, a myriad of factors will run through your mind as you create your must-have list. Your list will probably include neighborhood, size, location, and amenities. Among these, the quality of the local school district often plays a pivotal role in determining property values. This aspect isn’t just important for families with children; it also influences home values for individuals, investors, and couples without kids. Understanding how school districts shape property values can provide you with valuable insights, helping you make more informed and strategic real estate decisions.

  • Higher Property Values: Homes in high-performing school districts often see greater appreciation and higher values.
  • Increased Demand: Strong school districts attract more buyers, leading to faster sales and higher prices.
  • Neighborhood Appeal: Good school districts enhance neighborhood stability and desirability, boosting property values.
  • Higher Property Taxes: Homes in top-performing districts usually have higher property taxes, contributing to increased school funding and property values. The inverse is also true and can perpetuate educational and financial inequality.
  • Market Resilience: Properties in top school districts are generally more stable and retain value better during economic downturns.

Start Your Search with Home Location

In real estate, the principle of “location, location, location” is frequently emphasized as the primary factor influencing property value. Within this concept, the quality of the local school district is a crucial component in determining home values. This relationship is more than academic; it has practical implications for anyone considering a home purchase.

For families with children or those planning to start a family, the quality of nearby public schools is a major priority. A well-regarded school district can provide not only educational advantages but also a strong sense of community and stability. Even for buyers without children, the attractiveness of a high-performing school district may not be immediately apparent, but these districts often lead to increased property values, enhanced neighborhood appeal, and strong resale potential.

importance of home location in relation to school district

Whether you are a young family, an empty nester, or a first-time homebuyer, understanding how school districts impact property values can aid in making strategic, informed real estate decisions. Here, we explore the key ways school districts influence home valuation.

Four Ways School Districts Impact Property Value

1. Property Value Appreciation:

The impact of school districts on property values is most evident through property appreciation. Often, there is a direct correlation between the performance of local schools and the value of nearby homes. High-quality school districts tend to be associated with increased home values due to heightened demand and perceptions of community stability and prosperity.

For instance, a study reported by The New York Times revealed that a 5% improvement in school test scores can lead to a 2.5% increase in home values. Similarly, the National Bureau of Economic Research found that every additional $1 spent on public schools results in a $20 increase in home values. This data underscores the financial benefits of investing in quality education, benefiting both schools and local homeowners.

While standardized test scores are just one aspect of a school’s performance, they provide accessible information for narrowing down your home search. Homes in reputable school districts generally experience higher demand, quicker sales, and increased prices.

2. Increased Housing Demand:

High-performing school districts generate significant demand for homes. Research from the National Association of REALTORS® (NAR) indicates that 30% of buyers aged 33-42—likely to have young children—consider “quality of the school district” as a top factor when selecting a neighborhood.

Homes in desirable school districts often receive more online views and sell faster compared to properties in less favored areas. Realtor.com reports that homes in high-performing school districts sell eight days faster than those in other regions. This heightened demand can drive up property values, as buyers are eager to make competitive offers on homes in these sought-after districts.

Even buyers without children may find homes in strong school districts attractive due to the associated stability and potential for long-term value appreciation, further boosting property values.

3. Neighborhood Stability

The reputation of a school district can significantly influence the perceived stability and appeal of a neighborhood. Schools with strong academic performance and positive community engagement often create a “halo effect” that extends to the surrounding area.

This perception of stability and prosperity can enhance property values. Homes in neighborhoods with highly regarded schools are often viewed as more desirable due to the associated benefits, such as higher incomes, better resources, and lower crime rates. Although this is more of a perceived effect than a direct cause-and-effect relationship, it can still powerfully impact property values.

Appraisers consider both objective and subjective factors when determining a home’s value. As properties in desirable school districts generally achieve higher sales prices, this can influence appraisals and future property values in the area.

4. Impact of Property Taxes

While public schools may seem “free” to attend due to the absence of upfront costs or monthly fees, they are funded through local, state, and federal taxes, with local property taxes playing a substantial role. Homes in high-performing school districts often have higher property taxes, which are used to support and enhance the schools, creating a cycle of increased performance and higher property values.

In contrast, the funding disparities between affluent and less wealthy school districts can perpetuate educational inequality, affecting low-income students and contributing to a cycle of poverty. Additionally, the NAR found that home prices in high-performing suburban school districts were 49% higher than the national median and 77% more expensive than those in lower-ranked districts.

Many states have stepped in to help compensate for this imbalance locally, but it’s still important to understand how local property taxes fund public schools and the broader socioeconomic impacts concerning your own home research.

School Districts Matter, whether you have children or not

What Else Matters?

  • Resilience During Market Volatility:

    Homes in high-performing school districts tend to exhibit greater resilience during market downturns. An experiment by BiggerPockets, a real estate investor, found that properties in districts with high school ratings (4-5 stars) experienced less severe value declines during recessions compared to homes in less desirable districts (1-3 stars). This resilience is attributed to the sustained demand for homes in strong school districts, which can help maintain or even increase property values during economic uncertainties.

    For sellers, this means that homes in reputable school districts can be a safer investment during volatile market conditions, potentially achieving higher prices and quicker sales.

  • Proximity to Private Schools:

    The presence of private schools can also influence property values. While private schools are not funded through public taxes, their proximity can enhance the appeal of a neighborhood. Homes near prestigious private schools often command higher prices, as buyers are willing to pay a premium for the convenience and prestige associated with these institutions.

    The presence of both public and private educational institutions can make an area more attractive to potential buyers, driving up property values.

  • Finding the Right Fit:

    Ask ten different families and you’ll get ten different answers on what makes a school “good”. For some, traditional metrics such as test scores and graduation rates are sufficient, while others may seek a school that offers a specific cultural or emotional fit for their children.

    If you’re looking for a school district that aligns with your family’s specific needs rather than just a highly ranked school, consider exploring resources like Niche.com’s blog post “Beyond Test Scores, What Really Makes a “Good” School?” for additional questions to help you find the right school.

School Districts Matter, Whether You Have Kids or Not!

The impact of school districts on property values is substantial and multifaceted. Regardless of whether you have children, evaluating the quality of local schools can be a strategic component of your home-buying or real-estate-investing process. The benefits of purchasing in a high-performing school district extend beyond educational outcomes, affecting property values, demand, neighborhood stability, and property taxes.

Homes in strong school districts generally appreciate faster, attract higher demand, and offer greater long-term value. Understanding these dynamics can aid in making a well-informed real estate decision. Collaborating with a local real estate agent can provide further insights and help evaluate the best options based on your unique needs and goals. By factoring in the quality of local schools, you can make a more comprehensive decision that benefits you now and in the future.

Let’s get you pre-approved in your favorite school district, today!

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Have you ever dreamed of owning a home but felt discouraged by the thought of a hefty down payment? You’re not alone. For many Americans, saving for a down payment can be a significant hurdle. Fortunately, there’s good news! Down payment assistance programs (DPA programs) can help bridge the gap and make homeownership a reality.

We aim to bring more attention to DPA programs and the positive effect they have on home affordability, especially for first-generation and first-time homebuyers. Down Payment Assistance programs have never been more crucial. By increasing awareness among both buyers and real estate professionals, we can empower more people to achieve the dream of homeownership.

  • Down payment assistance programs (DPAs) exist to help you buy a home. These programs can provide financial support for your down payment and closing costs.

  • You don’t need a large down payment to buy a home. There are loan options with low or even no down payment requirements, and DPAs can further assist with this.
  • Closing costs can be significant. Understanding these costs is crucial when budgeting for your home purchase.
  • There are different types of DPAs. Grants, forgivable loans, low-interest loans, and deferred-payment loans are available options.
  • Eligibility for DPAs is broader than you might think. Many programs are open to a variety of individuals, not just first-time homebuyers.
  • Taking action is key. Research available DPA programs, get pre-approved for a mortgage, and work with a knowledgeable lender to guide you through the process.

What Are Down Payment Assistance Programs?

DPA programs are financial tools designed to ease the burden of down payments and closing costs for qualified homebuyers. These programs come in various forms, including grants, forgivable loans, and low-interest loans. They can significantly reduce the upfront costs associated with buying a home, making homeownership more accessible and affordable.

What Do Down Payment Assistance Programs Pay For?

Despite the general name of “down payment” assistance programs, many assistance programs allow funds to be used toward a down payment or closing costs, or both!

Down Payment:

Though there are several common loan programs with 0% down payment required for eligible buyers, generally the lowest down payment options you will find require 3-5% of the home purchase price to pay upfront on your loan.

Closing Costs:

Not as widely discussed as down payment, but equally as important is closing costs. This group of fees and expenses can potentially end up higher than your down payment amount (especially if using a low or no down payment option). Closing costs are fees and expenses, ranging from 2-6% of the loan amount that are also due at closing with the down payment.

They will cover services and taxes such as appraisals, title insurance, taxes, origination fees, etc. For example, if your home loan is $250,000, you might pay between $6,000 (2%) to $18,000 (6%) in closing fees especially if you live in an area with higher local taxes.

Pro TIP: Closing costs can also be a negotiation factor with the home seller/builder, real estate agents or your lender. You may not need a DPA program to help with these – let’s chat about this if you have more questions on closing costs.

Graphic explaining the difference between down payment and closing costs

Benefits of Down Payment Assistance:

  • Reduced Upfront Costs:

    DPA programs can free up your savings, allowing you to focus on other moving expenses or future home improvements.

  • Increased Buying Power:

    With DPA assistance, you could qualify for a higher loan amount, opening up more home-buying options.

  • Greater Affordability:

    DPA programs can make monthly mortgage payments more manageable.

  • Accessible for Various Buyers:

    DPA programs cater to a variety of individuals, including first-time homebuyers, people with disabilities, veterans, and low-to-moderate-income families.

  • Promotes Stable Communities:

    By helping more people achieve homeownership, DPA programs contribute to building stronger communities.

Types of Down Payment Assistance Programs:

There are numerous DPA programs available to fit different buyers’ needs. Here are a few common types:

  1. Grants:

    A homebuyer grant is a type of DPA program that provides a one-time cash sum applied directly to reduce the amount needed for down payment on the loan. The best part is – they don’t have to be repaid.

  2. Forgivable Loans:

    These function like second mortgages but are forgiven if you meet specific requirements like paying your mortgage on time every month and staying in the home for a specific period (typically from 3-10 years). The loan is forgiven in increments until it’s completely forgiven at the end of the period. If you decide to move before then, you’ll need to pay back the funds that have yet to be forgiven. If you adhere to the requirements, you won’t have to pay the loan back at all!

  3. Low-Interest Loans:

    These loans are similar to second mortgages but with a lower interest rate than your primary mortgage. You’ll repay the low-interest loan along with paying monthly payments for the first mortgage, typically over a few years.

  4. Deferred-Payment Loans:

    You don’t typically pay interest on these loans, but you’ll eventually need to repay them when you sell the house or refinance the mortgage.

  5. Individual Development Accounts (IDAs):

    These matched savings accounts require participants to save money and receive matching funds from a government agency or community organization.

Down Payment Assistance Savings Growth

Who Offers Down Payment Assistance Programs?

There are thousands of down payment assistance programs nationwide. Programs may be offered by your state, county, and city government agencies, non-profit organizations, or even individual mortgage lenders. They can take the form of grants, loans, or a combination of both. The terms and conditions of these programs are all very different, but the ultimate goal is to make home-buying more accessible for more people by removing barriers or adding incentives.

The Department of Housing and Urban Development (HUD) has a list of local home buying programs by state. Check with your city and county to see if they offer any grants or loan programs. Your loan officer can also help you to find the right DPA program for you!

What Are the Eligibility Requirements?

Qualifying for a DPA program might be easier than you think – don’t rule yourself out! Eligibility requirements vary by program, but here are some common factors:

  • Property Location:

Some programs prioritize buyers in specific areas, like rural communities or Metropolitan Statistical Areas (MSAs).

  • Cash Reserves:

Programs might require a minimum or maximum amount of savings.

  • Homebuyer Education:

Many programs require completion of a homebuyer education course. These courses can be done in person or virtually and provide valuable information about the home buying process, financial management, and homeownership responsibilities.

  • Occupancy Requirements:

These programs are typically for primary residences, not investment properties or second homes.

  • Income:

Programs often help those with incomes below or within certain area median income levels.

  • First-Time Homebuyer Status:

Often the term “first-time homebuyer” will refer to someone who has not owned a home within the last 3 years. Check with each DPA program to understand their requirements.

  • First-Generation Homebuyers: 

Some programs target first-generation homebuyers, who are less likely to be able to rely on assistance from family. 

  • Individuals with Disabilities: 

There are a variety of down payment assistance options available to borrowers who have a disability or a family member living with them that has a disability.

  • Service Professions:

Veterans, teachers, firefighters, and other community heroes may have access to specific programs.

  • Credit Score:

While some programs allow for lower credit scores, many still require a minimum credit score.

Misconceptions About Down Payment Assistance:

One of the biggest misconceptions about DPAs is that they’re only for first-time homebuyers. Not true!  Did you know that you can qualify as a “first-time” home buyer even if you’ve owned a house before? You are considered eligible to apply for first-time home buyer loans and benefits if you haven’t owned your principal residence in the last three to five years. So, if you owned a home in the past but are renting now, don’t just count yourself out, just make sure to check how your target program defines the term.

Nearly 40% of all programs are open to repeat buyers who have owned a home within the past three years or longer.

The Steps to Getting Down Payment Assistance:

The steps to access a DPA program typically involve:

  1. Pre-approval: Connect with a mortgage lender to help you understand how much loan you qualify for and how much assistance you may need.
  2. Research and Apply for Assistance: Your loan officer will help discuss your eligibility factors and find DPA programs that you could qualify for.
  3. Homebuyer Education: Most programs require completion of a short online or in-person homebuyer education course.
  4. Approval and Assistance: If approved, you’ll receive details about the program and the assistance you qualify for.
  5. Purchase Your Home: Work closely with your lender and realtor to ensure a smooth transaction.
  6. Comply with Program Requirements: Maintain eligibility by meeting program requirements, such as occupying the home as your primary residence for a set period.

Still Unsure?

Even if you’re unsure if you would qualify for a DPA program, don’t hesitate to reach out to your loan officer. This will give you a clearer picture of your affordability and potential loan amount. Your loan officer can assess your situation and explore all your options, including DPA programs, gift funds, and other strategies to tackle down payment or closing cost challenges.

Your loan officer will be happy to help you narrow down the programs you may be eligible for and help you navigate the process.

Remember, homeownership is a dream within reach for many!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. 

Whether you’re pre-approved for a mortgage or just closed the deal, excitement is likely swirling! However, amidst the joy, you might encounter an unexpected annoyance: an endlessly ringing phone, and a pile of unsolicited offers for other lenders, credit cards and insurance. In this blog post, we explain why this happens during your mortgage transaction and how to avoid the hassle of trigger leads and added pre-screened credit offers altogether!

What are Trigger Leads and Pre-Screened Offers?

The culprit behind this onslaught of mail and phone calls is a practice known as trigger leads. When you formally apply for credit or financing, like a mortgage, the lender you’re working with pulls your credit report and it’s considered a “hard inquiry“. While a hard inquiry is necessary to understand your true credit history and important credit information relevant to your home loan, it also simultaneously “triggers” a signal to other financial institutions that you’re looking for new credit (i.e. a loan).

Those companies can then purchase relevant data from credit bureaus like Equifax, Experian, and TransUnion and send out marketing to generate business in the form of pre-screened credit offers…thus, mail avalanche!

Guard Yourself from Scams

 

Many times, lenders who purchase these leads, won’t bother sending out mail and will directly call you as soon as they have your contact info in hand. The number is usually masked to look like it is coming rom your local zip code, but can be from anywhere in the country.

We’ve heard too many stories of sketchy lenders who have tried to trick a client into thinking they work with your existing lender. They may say “I’m working with your loan officer, we missed some important loan information, can I get your date of birth and your Social Security Number again?” Or “can you upload your documents into this online portal instead?”
These are terribly unethical business practices and we want you to be aware and take action before it happens to you!

Are Trigger Leads Legal?

Yes, trigger leads are legal. Under the Fair Credit Reporting Act, they are legal in all 50 states, as long as the company that’s buying the trigger leads meets certain requirements.

If you’re thinking, “How is this legal?” here’s the logic for it:

The Federal Trade Commission (FTC) and Consumer Finance Protection Bureau (CFPB) actually encourage this type of competition among lenders because they believe it gives you more buying power by presenting competing offers upfront and giving you additional offers to compare.

While the intention might be positive, the constant barrage of unsolicited offers can feel intrusive and inconvenient for most people.

So, what should you do?!

How to Opt-Out of Trigger Leads 

The good news is that everyone has options to fight back against this unwanted marketing, and it only takes a few minutes to complete! The sooner you act, the less unwanted mail you’ll be subject to. Here are three key resources to help you easily reduce or eliminate the junk mail and calls initiated by trigger leads:

OptOutPrescreen:

  • What it does: OptOutPrescreen allows you to opt-out of receiving pre-screened credit and insurance offers for five years, or permanently.

  • How to use it: Visit www.optoutprescreen.com/ or call 1-888-5-OPT-OUT (1-888-567-8688).
  • Cost: Free
  • Lead time: Can take up to five days to become effective.

National Do Not Call Registry:

  • What it does: This registry allows you to register your phone number to reduce telemarketing calls.
  • How to use it: Visit www.donotcall.gov/ or call 1-888-382-1222.
  • Cost: Free
  • Lead time: Takes about 31 days to become effective.

Direct Marketing Association (DMA) Mail Preference Service:

  • What it does: DMA allows you to choose which catalogs, magazine offers, and other mail you want to receive.
  • How to use it: Visit www.dmachoice.org/
  • Cost: $4 processing fee for personal mail (free for deceased individuals or dependents).
  • Lead time: Registration lasts for 10 years, but effective dates may vary.

Will Opting Out Stop All Unwanted Pre-Screened Offers?

While these methods can significantly reduce the amount of unwanted marketing you receive, it’s important to remember they might not stop it entirely. Some companies may still contact you based on other public information they can access. However, taking just a few minutes to opt-out will be well worth the effort!

It can take up to 6 weeks for the process to take full effect, so get ahead of it if you can. If you’re still getting junk mail after that timeframe, be persistent! Write “Refused: Return to Sender” on unopened mail and send it back. You can also file a formal complaint with the company directly.

More Tips to Avoid Pre-Screened Credit Offers:

  • Opting out early is key! The sooner you take action, the less junk mail you’ll receive. This whole process only takes a couple of minutes!
  • Do this for everyone involved in your loan. If you have a co-borrower or cosigner on your loan, they should also opt out for maximum effectiveness.
  • Keep an eye on your credit report. It’s always a good idea to monitor your credit report (not just your credit score) yearly for any suspicious activity. You can access your free credit report once a year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. This is not a hard pull on your credit, so no new trigger leads will occur.

 

Feeling overwhelmed or have questions?

Don’t worry, we’re here to help!
We’re here to be a trusted resource for all your home loan needs. Our team can help you understand credit reports, trigger leads, and how to achieve a stress-free homebuying experience. Contact us today to learn more!

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June is the best month of the year – It’s National Homeownership Month! As a local lender, we’re dedicated to helping people achieve sustainable homeownership and their American Dream. We believe in the power of owning a home, and we’re thrilled to celebrate the countless benefits it brings to individuals, families, and communities this month – and every single day of the year!

The Importance of Homeownership

Homeownership is more than just having a roof over your head – it’s a dream, it’s stability and control of your environment, and it’s a powerful tool for building wealth. Beyond the personal benefits, research shows that stable housing plays a crucial role in children’s well-being, strengthens communities, and contributes to a thriving economy.

We love telling the stories of happy homeowners, especially the ones that capture the joy and fulfillment that comes with ownership after overcoming challenges and hurdles. These new homeowners are the reason everyone at the NFM Family of Lenders is passionate about getting people and families into the homes they love.

The History of National Homeownership Month

To get a glimpse into why we celebrate Homeownership Month nationally, here’s a timeline of homeownership and this special month in the United States. These events have paved the way for more Americans to achieve the dream of homeownership:

Homeownership Rates in the US: A Reason to Celebrate

Homeownership rates in the US have steadily climbed over the years, offering a reason to celebrate progress. In 1900, the homeownership rate stood at 46.5%. By 2000, it had risen to 66.2%, and it continues to hover near that mark today. National Homeownership Month allows us to reflect on these gains and express gratitude for the increased accessibility of homeownership.

Homeownership Rates in US by State_Datawrapper

Here’s an interactive data visualization that lets you explore homeownership and renter-occupied housing rates by state.

Homeownership Rates Across Minorities

Single women can celebrate having the highest rate of first-time homeownership (19%) behind married couples (59%), and overtaking single men (10%). Especially since women in the U.S. were not allowed to finance the purchase of real estate without a husband or male cosigner until the 1970s.  

However, despite overall growth in minority homeownership, racial and ethnic disparities persist. According to the Census Bureau, the homeownership rate for non-Hispanic White Americans sits at 73.8% (4th quarter 2023), compared to 63% for Asian Americans, 49.8% for Hispanic Americans, and 45.9% for Black Americans. We still have work to do in ensuring equal access to homeownership for all.

Net Worth and Homeownership: Wealth Building at Home

Owning a home is a powerful tool for building wealth, particularly for low and middle-income families. Statistics show a significant gap in net worth between homeowners and renters. In 2022, the Federal Reserve reported a median net worth of $396,200 for homeowners, compared to just $10,400 for renters. This means the average homeowner has nearly 40 times the net worth of a renter. (see graph below):

Here’s what Economist at First American Title, Ksenia Potapov, has to say about the wealth gap between renters and homeowners:

“Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments . . .”

So, what’s the secret behind the #1 wealth builder for low- and middle-income Americans?  Here are some key factors:

  • Forced Savings: Your monthly mortgage payment acts like a form of forced savings. Unlike rent payments that vanish each month to build a landlord’s equity, mortgage payments contribute to your long-term wealth accumulation.
  • Equity Accumulation: When you own a home, you build equity as the value increases (appreciates) and through regular monthly mortgage payments. This equity becomes yours when you sell, providing a historically significant financial return.

Home Value – Loan Amount = Equity

Equity: the cornerstone of wealth building

Housing equity is the largest component of net worth for most owner-occupied households. Owning a home, even at a more affordable price point, can significantly contribute to your overall financial well-being through appreciation. This is especially evident for Black and Hispanic homeowners and those with lower-to-mid range incomes.

Benefits of Homeownership: More Than Just Financial Gain

Owning a home offers a variety of advantages that go far beyond just financial rewards. In fact, the impact on your physical, mental, and financial well-being can be life-changing. A 2013 study by two professors at the University of North Carolina at Chapel Hill documents a range of social benefits associated with homeownership.

  • Building Strong Families and Communities: The sense of satisfaction, stability, quality, freedom, and control that comes with homeownership extends to other important aspects of life, such as education, employment, healthcare, and retirement savings. Homeownership can also positively impact families and children.
  • Investing in Your Neighborhood: Studies suggest that homeownership can contribute to a stronger economy and a more vibrant community. Homeowners are more likely to be invested in their neighborhoods, which can lead to increased property values and a thriving local economy. They’re also more likely to participate in local activities and take pride in their surroundings, fostering a stronger sense of belonging and connection with neighbors.

Working Towards an Inclusive Housing Market

National Homeownership Month is a time to celebrate progress, but we acknowledge that significant barriers still prevent many Americans from achieving the dream of homeownership. Here at NFM Lending, we are committed to addressing these challenges head-on.

Recognizing that racial and social inequities, limited financial literacy, and systemic issues have historically disadvantaged certain communities in homeownership, we believe that advocacy and tailored financial solutions are key to closing these gaps. By providing access to funding for home construction and ownership, we can promote inclusive growth in the housing market.

We’re strong believers in creating a housing market that’s open to everyone. That’s why NFM offers special programs and resources to empower first-time homebuyers, low and moderate-income families, and communities of color. These initiatives aim to make homeownership a reality for everyone. And we want everyone to experience the joy and stability that comes with owning a home! You can learn more about our equity, and inclusion initiatives on our website.

Celebrating Homeownership and Looking Ahead

National Homeownership Month is a time to celebrate the power of owning a home and the positive impact it has on individuals, families, and communities. We’ve come a long way in increasing accessibility and equity in h, but there’s still work to be done. Here at NFM Lending, we’re committed to helping more people achieve their homeownership goals and build generational wealth in the process.

If you don’t know where to start, give us a call! We’re here for you before, during, and throughout your entire homeownership journey.