More than one-third of borrowers are insecure in their knowledge of personal finance.
As a mortgage loan originator (MLO), you have a unique responsibility when it comes to guiding borrowers through the mortgage process. Of course, you know that your role goes beyond simply securing financing. But you also have ample opportunity to empower clients by prioritizing borrower education.
In a world where personal financial knowledge can be a huge stumbling block, your role as an educator is vital. In this blog, we’ll explore the importance of prioritizing financial education, the benefits it brings to borrowers, and even a few perks you’ll get out of it yourself (differentiation from the competition, for starters).
Curiosity piqued? Let’s dive in.
Building a Foundation of Financial Knowledge
According to a recent report from the NextGen Homebuyer Institute, more than one-third of borrowers (37%) do not feel confident in their knowledge of personal finance. That means that MLOs can easily step in and provide valuable guidance.
So, what exactly are you responsible for parlaying?
As an MLO, you might often find yourself caught up in complexities. Maybe even forgetting that you need to slow down, simplify, and explain the terms and concepts that seem more than a bit obvious to you… Don’t worry, it happens to the best of us.
To really make the most of your role, though, it’s critical that you’re able to multitask. Basically, work through those high-minded problems while also distilling any complicated concepts into easily understandable information. You know what they say: the mark of a great teacher is the ability to make the complex simple!
Clients don’t necessarily need all your specialized knowledge, but a foundation might include:
- Setting, working toward, and achieving financial goals
- Managing credit
- Creating and adapting a coherent household budget
- Understanding the fundamentals of an investment (think: principal, interest, loan term, etc.)
The goal is to arm clients with the knowledge needed to make well-informed decisions that align with their homeownership goals. In doing so, they’ll find themselves better able to navigate the mortgage process with confidence.
Common Gaps in Borrower Education
While MLOs certainly understand how critical this kind of knowledge is, keep in mind that it’s potentially not as obvious (or accessible) for everyone.
Even in today’s age of endless information at our fingertips, there are a few substantial gaps when it comes to the average American’s financial education.
Chew on some of these stats, to start:
- Americans lost a staggering $415 billion due to poor financial literacy in 2020 alone.
- 87% of American teenagers report that they do not understand their finances.
- Last year, only 23 states required financial literacy courses for high school students.
Unfortunately, the concepts you deal with day in and day out don’t come quite as easily to most Americans. Are you starting to see just how many clients, current or potential, could use your guidance?
The Benefits of Borrower Education
There’s light at the end of the tunnel, though. With a little help from their local MLO, borrowers could reap the rewards of increased education.
When borrowers have a solid understanding of personal finance, they can evaluate all their options more effectively. This leads to more informed decisions that better align with their long-term financial well-being. Goodbye, impulse buying, and hello, homeownership!
Greater Financial Stability
Borrowers who are in-the-know are also better able to manage their finances outside the mortgage process. They become more likely to maintain healthy financial habits, manage debt responsibly, and plan for their future.
Essentially, your financial wisdom can help clients become more confident, better equipped, and more knowledgeable all around. Talk about a win-win-win.
Here’s What’s in It for You
Prioritizing borrower education doesn’t just benefit clients, though. It could be a boon for your business, too.
In a competitive mortgage market, differentiating yourself from the competition is critical. By prioritizing financial knowledge, you establish yourself as someone trustworthy, knowledgeable, and, above all else, caring. This will instantly draw a line in the sand between you and the MLOs who solely focus on closing deals.
Plus, clients will usually inherently trust you more if you can provide value. This includes actionable advice or educational resources. In the mortgage industry, trust translates to repeat business. In other words, by prioritizing borrower education, you just might earn yourself a client for life.
How MLOs Can Prioritize Borrower Education
So, how can you put all this information to work?
Trying to communicate even slightly more during every phase of the process will go a long way regardless. But, if you’d like to take it a step further, you can take an active approach to educating borrowers.
A few ways to get started might include:
- Workshops or webinars on home finance basics.
- Blog posts, social media posts, or email campaigns focusing on finance fundamentals.
- Take-away materials explaining common jargon, acronyms, and more.
- Local contacts, vetted courses, favorite apps, or other resources you can vouch for.
- Updates on market trends.
- Q-and-A sessions at the end of each meeting or call.
Tailor your approach to your unique knowledge and strengths for the most bang for your buck. Then, adapt and adjust as necessary. Asking for feedback and reviews specifically related to borrower education can also clue you into where you’re excelling and where you could improve.
Remember, borrower education is so much more than any one-off interaction. For stellar MLOs, it’s an ongoing commitment. Look to provide value wherever you can, whether hosting a workshop or giving advice. Over time your clients — and our society — will be better for it.
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