If you use a realtor to buy a house, chances are he or she may recommend other professionals to help you finish the process. Among those professionals, the realtor may suggest a specific lender. It may seem like a great idea to use the realtor’s preferred lender, but there are pros and cons in this decision.
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The Benefits of Using the Realtor’s Preferred Lender
Using a lender the realtor does business with does have its benefits. For starters, you save time. You don’t have to call around and talk to different loan officers. Your realtor introduces you to the loan officer and you carry on with your business. It’s an incredible time saver if you decide to use that lender.
When the realtor and lender work together, the process may go smoother. They know how to work with one another and how to get the job done fast. The realtor can prepare you ahead of time, knowing what the lender typically requires. Plus the realtor knows what the loan officer needs to get the loan closed.
You may even save money by using the realtor’s lender. Some realtors and lenders collaborate to give buyers incentive to use their lender. You may save a little money on your closing costs or get a quote for a slightly lower interest rate than the lender offers other buyers. The mortgage company cannot give the real estate agent a kickback, though, as it’s illegal.
Using the realtor’s preferred lender also gives you the leg up on the competition. The realtor isn’t going to send you to a lender that only closes a some of the loans sent to them. The realtor will only recommend lenders they know will close the loan once they supply a preapproval. The proven track record of the lender and realtor working together can help in bidding wars. If a seller knows of the reputation of the realtor/lender combination, he/she may be more likely to accept your bid.
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The Disadvantages of Using the Realtor’s Preferred Lender
Using the realtor’s preferred lender does have its downsides. Because the two work together, you don’t have that independent person looking things over for you. Sometimes it’s nice to have another set of eyes looking over things. An independent lender may catch something odd in your contract or in what the seller asks of you. The lender can’t do much about it, but alerting you of the issue is enough for you to look into it.
You may also feel guilty if you shop around after talking with the realtor’s lender. We always suggest that you get quotes from at least three lenders. This way you know what the average interest rate and closing costs are for your loan. The loan officer your real estate agent sent you to could be less expensive or more expensive than others. You won’t know if you don’t shop around.
You Make Your Own Choices
You are under no obligation to use the lender your real estate agent recommends. While it’s nice that your agent offers his or her suggestions, it’s just that, a suggestion. You can take it or leave it. If you use a different mortgage company, your real estate agent still needs to represent you. You can still see the same houses and bid on the properties you like.
Compare the quotes offered to you by at least three lenders before making a decision. You can let your realtor know that you are shopping around. It may work to your benefit as many lenders will meet or beat other quotes that you receive. A mortgage is one of the largest investments you’ll make in your lifetime. Make your decision based on your needs to make the smartest financial decision for you.
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