With few homeowners willing to give up their low mortgage rates, Mike Roberts has shifted his focus to targeting first-time homebuyers.

He’s been watching the spring homebuying season slowly pick up and buying leads through Zillow and Realtor.com. It’s a lot of work, and there’s no guarantee that they will pay off.

“A first-time homebuyer requires a tremendous amount of nurturing,” said Roberts, the president and founder of City Creek Mortgage. “We have a system where we follow up with them 19 times over a three week period, until we actually connect with them.”

Roberts and thousands of other loan officers across the country continue to be hampered by a serious inventory shortage, which results in heavy competition for fewer deals. To achieve deal flow, loan officers have been forced to come up with creative ways to persuade buyers they can make the deal work, half a dozen of mortgage professionals interviewed by HousingWire said. 

“This is honestly where good loan officers can really separate themselves,” Josh Burruss, executive vice president and chief lending officer of Intercoastal Mortgage, said. 

“What we’re seeing is just increased competition over every deal. There’s a lot of lenders that are running really lean on everything,” Burruss said.

Strategies to differentiate themselves include buying leads, providing niche loans and getting on builders’ preferred lender list. Another tactic is to capitalize on newly built homes – a silver lining in the inventory-lacking market – which now account for a third of available inventory, double than normal levels, according to Redfin.

LOs do something new

In an environment where every deal counts, some go niche. 

Brian Parkinson, a loan originator at Alerus Mortgage, says that niche loans – including bridge loans, construction loans, doctor loans and professional series loans for CPAs and attorneys – are a great way to grab an agent’s attention in a market where referrals are critical. 

Bridge loans are popular among his clients since they allow homeowners to tap into their equity when buying a home, as well as a professional mortgage where buyers in a specific industry can make a 10% down payment without mortgage insurance, Parkinson explained.

Niche loans consist of about 5% of Parkinson’s business.

“It’s a small amount but it’s nice to have products where you can get a real estate agent’s attention with a product that another lender doesn’t have. It could open up the door for more business,” he said. 

There are also advantages to working with buyers in a less competitive marketplace. 

Buyers want the 30-year fixed mortgage rates to drop to the low- and mid-5% range but with that decline will come home price increases and increased bidding wars, Daniel Arias, loan officer at We Fund LA, a division of New American Funding, explained.

“Although rates are high, we have to educate our clients and walk them through why there’s a unique opportunity (…) sell for the higher rate and refinance down the road, that’s the conversation we’re having with most of our clients,” Arias said.

“There’s just more buyers than there are sellers,” added Steven Grossman, chief strategic officer at NJ Lenders. “Waiting for rates to go down is just a foolish bet. When rates go down, prices are gonna go up and you will see more bidding wars.”

NJ Lenders does a presentation for their clients of what they would be paying for a monthly mortgage payment at the current mortgage rate versus a future payment with lower rates and an appreciated home price. 

“It’s an interesting exercise (…) A lot of the clients view it as an opportunity to get an aggressive price because if rates come down a full percent, it adds another significant amount,” Burruss explained.

Capitalizing on the two-story market

New builds represent another silver lining.

The past year’s pullback in the price of lumber and other materials has helped builders maintain margins even with price cuts. That’s why builders are utilizing closing cost incentives and temporary rate buydowns often funded by lenders.

“If I were a builder right now, I’d build as many houses as I could, because there is a lack of inventory, they’re pretty much the only sellers,” Roberts said.

Some markets like New Jersey don’t have land to build new homes. But in areas where new construction is strong – including Northern Virginia where Burruss is based – loan officers are  taking advantage of being on builders’ preferred lender list. 

If a builder’s clients chooses to get a mortgage through a company that is on the builder’s preferred lender list, buyers are able to waive the closing cost. Being on multiple builders’ lists is a way to rack up more deals for loan officers. 

“A lot of builders have preferred lenders, some of the builders own their mortgage companies. Other ones will have preferred lender lists where if you work with one of four lenders, you can get a closing cost incentive,” Burruss said. 

“I do a bunch of new builder business, just by being in that second category of earning it as a preferred lender on different builders accounts. I’ve got a reputation for doing that business for a long time. So I get to dip my toe into both worlds,” Burruss added. 

Fighting an information battle

With inventory trends still looking gloomy, some mortgage professionals believe lower rates are the only real difference maker. 

When rates get closer to the 5%-range, existing homeowners who need to move into bigger homes will feel comfortable giving up their low mortgage rates and locking in a higher one, Donny Kirby, president of ClearPath Home Loans, noted.

“I think if we get down close to the 5% range, that will definitely open up a lot of buyers from an affordability standpoint. Homeowners are more likely to move up from 3% to 5% mortgages when the perfect home hits the market,” Kirby said.

Between the Federal Reserve‘s inflation-fighting battle and volatility in mortgage rates, loan officers are fighting an information battle right now.

“So the good loan officers are spending a lot of time being a really good reliable source of information and explaining what’s going on to the clients in real-time so they understand what’s hype and what’s not hype,” Burruss said.

It’s taking people a lot longer to buy a home, so staying in touch with clients and adding value to their buying experience is crucial, Grossman added.

“The man with the most friends wins (…) because somebody has got to get the offer accepted. So you just hope that it’s your client,” Grossman said.