How does my Realtor work with a loan officer?
It's settled. You've got some money saved up for a downpayment and you're ready to start your home buying journey. You've done your online research and have pretty much narrowed down the neighborhoods you're interested in. You can't wait to go house hunting.
But wait. Do you find a reputable real estate agent first? Or do you connect with a lender before you look?
Realtors and lenders help you accomplish your home buying goals by working together. In this blog post, we'll cover the lender Realtor relationship, and help you understand how to select the best partners for a seamless and snag-free home buying journey.
Which came first: chicken or the egg?
It's common for house hunters to sometimes think that real estate agents are the mortgage company gatekeepers. Frequently they have a list of trusted lenders they work with. Some may even have a loan office right in the real estate company's facility.
While it seems convenient — and maybe even logical — to work with a Realtor first, it's important to do your own research ahead of time. You'll want to understand how much you can afford and what monthly payment you'd be comfortable with before you get too attached to a home that might be well out of reach. You'll also want to talk about home loan closing costs and other fees. Those can eat into the savings you've earmarked for your downpayment and indicate that your house hunting plans may be a little premature. Getting pre-approved by a lender is the most reliable way to understand your house buying budget before stepping foot in an open house.
RESPA's got your back
Many Realtors and lenders have co-marketing agreements. They spend money to market themselves as partners, bring each other business and rely on the services of the other to give them an edge over the competition.
Make total sense. But when less than reputable Realtors and lenders work together like this, things can get a little fuzzy. The Real Estate Settlement Procedures Act (RESPA) is part of a federal law that governs interdependencies between Realtors and mortgage companies. It expressly prohibits agents from receiving anything of value from a mortgage professional in exchange for the referral of business.
Additionally, the law cites that a homebuyer can't be forced to use a lender working with a particular Realtor. So if you feel pressured into choosing a lender just because of a Realtor referral, you might consider walking away.
That said, ask around. Talk to people who have bought homes in the area you're looking to move to and seek our referrals. A partnership between a Realtor and a loan officer can sometimes be the best of both worlds — like Batman and Robin, Frodo and Sam, or Woody and Buzz.
If both are dedicated to the community they serve — if they live in the neighborhood — you're most likely going to get excellent service. These professionals live by referrals: if you like working with them, you'll tell a friend. And so on and so on. By all means, don't discount the power of the relationships between a Realtor and a lender.
Find a no-pressure loan officer to work with
Sure, we're biased, but we wouldn't steer you wrong. Our advice is to start by finding a no-pressure lender or loan officer and work on getting pre-approved — not just prequalified (there is a difference) — before you start down the road with a Realtor.
Keep in mind that real estate agents are salespeople at heart. And while they're certainly a valuable asset when it comes to finding you the right neighborhood, honing in on what could be your dream home, uncovering the best value and negotiating contracts — they're not financial experts.
It's up to you to understand your budget and the benefits and terms of different loan products. Similarly, it's to your advantage to research the best mortgage rates, which could save you tens of thousands of dollars in interest over the life of your loan.
Watch for home financing myths
Unfortunately, there are some general home financing misconceptions out there that can influence first-time homebuyers to bypass the research phase and dive right into the more fun activities of house hunting. Some of these misconceptions include:
“Applying with more than one lender will sink your credit score.”
While it's true that multiple hits on your credit can lower your score, not all inquiries are created equal. FICO allows for rate shopping by counting all similar inquiries made within the same 30-day period as a single inquiry. This means you can visit as many lenders as you'd like as long as it all happens within 30 calendar days.
“There's no rush. Rates are the same everywhere.”
Like with any financial product, a lender might decide that they want to be a market leader for a particular loan type. If that's the case, there's a good chance you'll find competitive rates when you shop around. But even when rates are comparable from lender to lender, weigh the level of service offered. Is the loan officer attentive? Do they repeatedly ask for the same documents? Are deadlines and other milestones being missed?
“That rate is too good to be true.”
For a time, there was a dark cloud that hung over the home financing industry called the “bait and switch,” where a borrower was lured in with an amazingly low rate only to be pressed to agree to one that's not so hot. If that happens, contact the Consumer Financial Protection Bureau to file a complaint. Because complaints are available for public viewing, reputable lenders aren't going to risk the bad press.
“Pre-approvals from unknown lenders don't count.”
Wrong. But pre-approvals with underwritten backing count more. All mortgage companies are held to national and state-level licensing requirements that are even more stringent since the housing crisis of a decade ago. And it's relatively easy for you — or a seller — to verify the licensing status of any company you want to work with.
“They can't commit to a closing date.”
Many lenders will lure you in with the promise of a quick closing. But few can match Movement Mortgage's goals to provide pre-approval underwriting results within six hours of receiving an application, process loans in seven days or less, and close in just one day.
Ready to get started?
Now that you understand what the relationship between your Realtor and loan officer is, you can make an educated decision on how to proceed. Of course, it's totally OK to trust the referral of a Realtor, but you should also do your own homework to make sure you're getting the best deal.
Before you start the homebuying process, your first phone call should be to a loan officer to determine what you can afford and get you pre-approved for that amount. Find a local loan officer here.
Remember, having an underwritten pre-approval means that you can make an offer on your next dream house with confidence. And that gives you a competitive edge over other homebuyers.
