It’s common practice for real estate agents and builders to offer recommendations for various services, big and small, throughout the home-buying process. Accordingly, optimal loan options and a suitable mortgage lender are critical steps, no matter the loan amount. So why do agents and builders want buyers to use “their’ preferred lender? Is it because they are the best in the business? Or should buyers shop around for their own mortgage company and loan products? The simple answer is yes! Ultimately, educated buyers secure the best interest rates and loan terms, regardless of lender choice. Let’s talk about incentives because everyone wants to rest assured they have made an educated decision.
A typical real estate myth is that builders and agents get some kind of kickback for the referral. In fact, the Real Estate Settlement Procedures Act (RESPA) prohibits payment for referrals on all loans. From conventional to non-conventional loans, FHA loans, Jumbo loans, USDA, and VA loans, RESPA applies to every mortgage loan you can get from a lender.
There’s actually an excellent reason for a real estate agent and builder to recommend a reputable mortgage lender, and it benefits the prospective homeowner, too. The language is clear – RESPA prohibits anyone from enjoying any kind of payment or compensation as thanks for a referral on a federal mortgage loan—the key benefit of using a Preferred Lender.
The benefit of a professional referral, whether from a builder or an agent, is the ease of the working relationship between both parties. Agents and builders understand that time is money. When mortgage rates are favorable, they have a client with an excellent credit score with secure funds for down payments and closing costs; these professionals know that expediting the process from loan origination through underwriting is equitable for everyone. In this event, everyone benefits, from client to lender, and the more often these transactions occur, the better off everyone is!
Using a builder’s preferred lender
Often, homebuyers (especially first-time homebuyers) fall in love with the idea of a new home. Let’s face it: new construction does have an aesthetic appeal. After all, a new home already offers upgrades that many pre-existing houses cannot compete with. As a solution, builders across the board have streamlined the loan process, and the bottom line is that they have perfected their sales pitch, timelines, and loan programs, coupled with in-house preferred lenders waiting for homebuyers seven days a week. New homebuyers simply agree to a credit check, provide a few documents, and are off to the races from preapproval to the loan close.
Frequently, borrowers feel uneasy about the one-stop-shop method of home buying. Undoubtedly, conflict of interest insecurities often arise throughout the process, especially considering how builder-centric the working relationship between the lender and builder is. Above all, when the market is booming, and buyers are chomping at the bit to secure property, time is of the essence. The last thing a buyer needs is to lose out on the property because of delayed timelines with lending.
Alternatively, new home buyers working with a specific builder have alternative financing options when the housing market cools. In this case, using a different lender, such as a credit union or a mortgage broker, is advised. In addition, buyers can use this extra time to shop mortgage rates, secure rate locks, or even buy down interest rates.
The mutually beneficial relationship between Lenders and Real Estate Agents.
There may not be a financial reward for a realtor to recommend a specific lender, but there is an incentive. There are a lot of potholes on the road to a new home purchase, and one of the biggest relates to financing. It’s a piece of the puzzle that requires diligence, timeliness, organization, and experience. And while there may be endless options for lender choice, that doesn’t mean they’re all equal.
Any real estate agent closing steady business deals has likely been through enough lenders to know which ones deliver. That means a referral to a specific lender is born of personal experience. And that’s saying something. After all, the agent’s goal is the same as the buyers – getting into that beautiful new home as quickly and seamlessly as possible. That’s why they’ll do whatever they can to make the process as straightforward and stress-free as possible.
Incentives
There’s an incentive on the lender side, too. To ensure agents keep sending these kinds of referrals, a lender must exceed expectations – every time. Surprisingly, many working relationships between lenders, builders, and agents become so familiar that these professionals simply text one another to process paperwork, provide loan details, and seamlessly move the loan forward. Who could imagine a more ideal situation? As noted, time is money, and when a team of professionals is focused on the best use of time and ultimately using a buyer’s money to optimize their new lifestyle, this is the perfect solution for all parties involved.
Have a Conversation
At the very least, it’s worth speaking to an agent’s recommended lender. Frequently, potential buyers encounter unbelievably low rates found online but are unsure of the unforeseen. Buyers often decide to move forward with a lender of their choosing, regardless of referrals, which is okay. One important consideration is that the lender’s most important job is simply to process loans efficiently, without mistakes, and on time. That’s it. After all, there are advantages to these kinds of personal recommendations.
Additional financing opportunities
Ultimately, many lenders can provide funding to homeowners beyond the initial purchase. In this case, once a home has gained substantial equity, additional financing opportunities exist for refinancing. As a solution, lenders offer home equity loans (HELOC) to improve property, pay off other debt, and buy additional property. When the relationship between lender and client becomes lifelong, refinance loans can open a world of opportunity to homeowners.
Now that you understand the importance of preferred lenders, let’s connect you with a lender who can help.
The steps are simple:
1. Schedule a Call: An experienced loan officer can discuss your lending needs and guide you through the possibilities.
2. Get Approved: We’ll help you through the application process and facilitate the steps for approval.
3. Exhale: Put your feet up and feel secure knowing you made the best decisions about your home loan.
With proper guidance, you can get your first home, accommodate your growing family, and start that renovation project—whatever goal is on the horizon. An alliance with Mortgage Insiders will give you the confidence to know that your mortgage loan is setting you up for financial success. Mortgage Insiders offers today’s latest financial news and mortgage trends. Check out their channel for current events.
