Guiding first-time buyers on the long and winding process toward homeownership is in great part what a real estate professional does. These days, there’s so much more to it than accompanying clients to houses and keeping them updated on new developments in the market. 

During a recent NAR NXT Up virtual event titled, “New Ways to Serve First-Time Home Buyers,” two Fannie Mae executives, Katrina Jones, VP of mission and impact, and Stacey Shifman, vice president of single-family consumer credit analytics, broke down how technology is transforming the mortgage process, making it smarter, faster and more inclusive.

Highlights included the use of technology and data to transform access to homeownership, particularly through Fannie Mae’s Desktop Underwriter system. Key innovations discussed included the use of third-party data for validating income, assets and employment, as well as positive rent payment history and cash flow underwriting to assist borrowers with limited or no credit history.  Also emphasized was the importance of understanding future household formation trends and the barriers faced by new homebuyers, such as limited credit history and high upfront housing costs. Real estate professionals were encouraged to leverage these tools to better serve clients and expand the pool of eligible buyers, concluding with a call to action for agents to engage with lenders about these capabilities and provide resources for further information.

“We are typically behind the scenes… we don’t often directly interact with renters or homebuyers,” explained Jones to the agent audience. “You all play a very important role, as my mom would tell me as a former agent.

She would say you are the trusted advisors, the ones who are walking alongside individuals and families as they navigate the housing process, the mortgage process, their homeownership journey. You help them overcome their barriers to housing no matter how big they are, no matter how small they are. Last year we provided about $380 billion in financing to the housing market.”

Fannie Mae has developed several innovations in its Desktop Underwriter (DU) tool to better serve first-time homebuyers:

• Positive rent payment history. This allows lenders to consider a borrower’s history of on-time rent payments, even if they don’t have a credit history.
• Cashflow underwriting. This looks at a borrower’s overall cashflow and financial picture, rather than just credit scores, to assess their ability to repay a mortgage.
• Accommodations for student loan debt and first-time buyers. Fannie Mae’s research shows these borrowers actually perform better, so they are more likely to be eligible for Fannie Mae financing.

Shifman noted that Fannie Mae employs a service where it validates income, asset and employment for lenders.

“Having this data available is really just a game-changer for underwriting,” she said. “It gives us a more complete and nuanced picture of borrowers, financial profile and behaviors. And it really allows us to identify the qualified borrowers who might’ve been overlooked by the traditional methods of a credit report, especially as we think back to those with that limited or no credit history and that barrier.”

Shifman advised that agents should be aware of common barriers first-time buyers face:

• Limited credit history
• High rents limiting ability to save for a down payment
• Lack of financial resilience (e.g., only one paycheck away from trouble)
• Aging housing stock requiring more maintenance

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