Why Some Lenders Aren’t Keen on Working with First-Time Homebuyers (And How You Can Still Make it Work for You)

As a first-time homebuyer, you may be surprised to learn that not all lenders are thrilled to work with you. While this doesn’t mean lenders “hate” working with first-time buyers, it does mean that some might prefer not to. Let’s dive into why that is, how it affects you, and what you can do to make sure you get the best deal for your first home purchase.

Why Lenders Prefer Not to Work with First-Time Homebuyers

The reality is that many loan officers aren’t too excited about working with first-time homebuyers, especially when compared to more experienced buyers. Why? It comes down to money—specifically, how much the loan officer can make from the transaction.

Here’s how it works: when you take out a mortgage, the loan officer typically makes a commission (often around 1% of the loan amount). So, on a $500,000 loan, the loan officer could make about $5,000. That sounds good, right? But first-time buyers often take longer to find the right house, and there’s a lot more paperwork and time involved in getting them approved. The transaction can take several months, sometimes even longer, before it’s finalized, and the loan officer doesn’t get paid until closing.

This means that a loan officer could be working for months with no pay, which isn’t ideal, especially when they could be working with an experienced buyer who might close a deal much faster. It’s a simple case of supply and demand: working with first-time buyers may not always be as profitable as working with experienced ones.

The Drawback of First-Time Buyer Programs

Many first-time homebuyer programs come with strict limits on how much a loan officer can charge. For instance, some programs allow them to charge only 1% of the loan, which may seem like a small amount considering the time and effort required to close the deal. In contrast, with more traditional loans, a lender may be able to charge higher fees or offer a higher interest rate, which results in more money for the loan officer.

That said, these first-time buyer programs are designed to help you get a better deal—lower fees, lower interest rates, and more affordable payments. The catch is that loan officers may be less motivated to offer them to you because they can’t earn as much.

How to Ensure You’re Getting the Best Deal

So, how do you make sure you’re not being pushed into a loan that benefits the lender more than you? The key is finding a lender who specializes in working with first-time buyers. These lenders are familiar with first-time buyer programs, and they understand that helping you get into a home is their primary goal. They know the ins and outs of the available programs and are more than happy to work with the lower fees because they do higher volumes of these types of loans.

Look for lenders who focus on first-time homebuyer programs and have a good track record of helping clients like you. These specialists will ensure you get the best rate and terms, even if they only make the 1% commission on your loan.

The Bottom Line: Finding the Right Lender for You

While some lenders may not be keen on working with first-time homebuyers, you can still find the right one who will guide you through the process and help you take advantage of first-time buyer programs. Remember, these programs are there to make homeownership more affordable and accessible, and with the right lender, you can make sure you get the benefits you deserve.

So, don’t let the fact that some lenders may prefer more experienced buyers discourage you. With the right team behind you, your dream of owning your first home is still within reach!