Written by Brad Dawson
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What a strange state the real estate and mortgage markets are in, as there has been a lot of water under bridge over the last couple of years. There are so many factors at play in our current market that I don’t think any one person or company, including our federal government, can keep track of it.  The 800 pound gorilla has been working out and has grown into something nobody can contain.  We should also make note that the housing credit pulled so much demand forward that the housing numbers in July dove off a cliff, but this blog is not about milling out the pain. We are going to talk about finding deals, specifically FHA new home leads.


There are a few different methods out there for finding first- time FHA buyer leads, who all of which have their own merits and liabilities. Web based leads are people who entered their name on a website asking to be contacted, and generally have low conversion rates because nothing is known about their credit.  After spending a lot of money to talk to one person you’ll most likely find out the reason they put their name on the website in the first place is because they have not been able to buy a house or get their loan through other channels.

Let’s take a moment here to talk about the three common reasons real estate and mortgage deals fail.  There are many reasons a deal can fall out but it’s usually due to one of these reasons:

1. Credit Does Not Meet Underwriting Guidelines – We can screen out people who have no hope of qualifying through the process of a soft credit inquiry.  We’ll talk about the selections needed a bit later.
2. Title Issues – Child support, alimony, judgments, etc.  Many of these issues tend to be the types of things your client never tells you about. A good broker or real estate agent will always ask about these, and if your client does not tell you about them you can bet your title company will.  If you have been in the mortgage or real estate business for any amount of time it’s very likely you’ve had this happen more than once.  Once the title report comes back you find out your borrower is years behind on child support, alimony or something similar.  Unfortunately, there is no way to pre-screen for this type of thing. 
3. Income – Much like title issues, income will stop a deal dead. In today’s market documented income is part of doing business, much like it was before the boom.  We’re back to underwriting standards that require people to prove that they have a reasonable chance of paying back the loan.

There is no lead in the world that can accurately predict income or pre-screen for title issues. However, we can take one variable out of the funding equation by using our soft credit inquiry data to eliminate credit issues. The main advantage of pre-screening our FHA first-time buyer leads is the ability to weed out the people who have no hope of ever qualifying. In result, the conversations you do have will be with people who should be FHA bankable customers.

Making Contact:

We’ve described some of the pitfalls of why deals do and can fall out, and we have touched briefly on how using soft inquiry or hard inquiry (triggers) data can help eliminate some of the credit issues when looking for FHA first-time buyers. Now we are going to spend a bit of time going over the details of how to make contact with these buyers.  Using a soft inquiry credit screen we’re going to run the following criteria. Each one of the selections is important, but perhaps the two selections that are of greater significance are the credit score and auto payment. The credit score is of course the main qualifier to determine if they are FHA bankable, while the auto payment helps to identify those with real income.  As we mentioned earlier, income is one of the harder things to derive on any list.   Looking at real reported numbers on the credit report helps us find out who has the real income and has the best chance of making a mortgage payment. We’ll generally run this type of screen for a given county, zip code, or within large metropolitan areas.

1. No mortgage trades on the credit report
2. Credit of 620+ (This ensures they will be FHA ‘bankable’)
3. Existing credit trade lines are paid as agreed
4. Credit utilization under 50% (this will help the DTI ratios when it comes time to get the loan underwritten)
5. Auto payment 350-600$ (this is proven to be one of the better income qualifiers)

Using the results of this search we will send out a pre-approval mailer customized with your company’s name and contact information. The pre-approval letter is powerful in this current cycle, as credit is tight and the days of getting multiple loan and credit card offers in the mail daily are long gone.  Our letter lets our potential customer know they have been pre-approved for an FHA loan, and works for both the mortgage broker and realtor. If we are sending out the mail for a mortgage broker, we let the customers know the broker has approved them for the loan. For instance, the letter lets them know they will be teamed up with a realtor to go ‘house shopping’.  If we are sending out the letter for a realtor the same holds true; you’ll take them shopping as the letter states that they have already been pre-approved for the loan.

Our second method for reaching FHA first-time buyers involves using mortgage trigger data. If you are a mortgage broker, you can probably skip this as you are most likely familiar with using mortgage trigger data. The process of finding FHA first-time home buyers using the trigger method is very simple, as we look for a trigger without an existing mortgage balance. The mail piece sent out is very different from the one mentioned earlier, as this is a lower volume process with much higher response rates.  The letter will be sent overnight or by priority mail, and usually left on the door step instead of in the mailbox. This letter is materially different because the credit check was due to a mortgage inquiry, so we know the customer is already in the process of shopping.

Learning to work this market is essential in this current credit environment. As the re-fi market continues to shrink the FHA first-time buyer market is something the real estate and mortgage community must embrace and service if we are going to thrive in the next 36-48 months. I always end my blogs by saying this is the just the beginning and I don’t want to disclose everything about either program.  We want Black Book Data’s clients to have the benefit of our knowledge and every advantage possible. We have a proven a system that is producing on both sides of the FHA first-time buyer for the mortgage broker and the real estate agent.

For more information on FHA New Home Buyer Leads Click Here.