Is it smarter to select a Realtor or lender first? Find out what you need to know when choosing a real estate agent and a mortgage lender – as well as some tips for selecting the best partners for your home purchase.
We Are Biased – But Hear Us Out
When it comes to buying a home, it’s natural to think of selecting a Realtor first. After all, the shopping part is a lot more exciting than the financial/paperwork side.
According to research from the National Association of Realtors, 44% of homebuyers begin by looking at properties, while another 17% goes directly to a real estate agent. This may come as no surprise however, you really are best served by starting the process with a lender.
Why? Because one of the most important concepts to understand is how much you can afford and how much you will ultimately spend beyond the cost of the house itself.
Here Are 5 Reasons to Start with a Lender – Explained
1. It sets realistic expectations
There’s nothing worse than finding your dream home, then realizing that it’s just outside your financial reach. Plus, just getting an online quote isn’t the same thing as being preapproved. A preapproval letter proves to both real estate agents and sellers exactly what you can afford.
2. You can still shop around
Just because you’re preapproved for a loan doesn’t mean you have to stick with that lender. You can continue to apply for loans from other lenders — just be sure to collect your offers on the same day, since mortgage rates change every day.
To keep your credit score strong, do all of your loan shopping over a short period of time. Typically, your credit score gets dinged every time a company — like a lender — pulls your report. But if you apply with several lenders within, say, two weeks, all the inquiries will count as a single inquiry.
3. It helps catch sellers’ eyes
Coming in with a preapproved loan offer, whether you’re talking to a real estate agent or a potential seller, proves that you’re serious. You want to present yourself as hassle- and complication-free, especially in competitive real estate markets. You aren’t “just looking” and a seller can trust that you can actually sign the check.
4. You’ll finish the paperwork earlier
You’ll need a lot of paperwork to complete the loan, including tax returns and W-2s from the past two years, pay stubs for the last 30 days and recent bank statements. Starting the document-collection process earlier will make it easier when it’s time to finalize your loan, and it reduces the likelihood that the seller pulls out because of mortgage complications.
5. It helps you know what you’ll pay at closing
The first check you write is going to be for more than just your down payment. After you apply for a mortgage, the lender will give you an idea of how much origination fees, title fees and appraisal fees will cost. While the seller often pays at least some of the closing costs, your share might still be as much as 3% to 6% of the loan amount.
