Should You Use the Mortgage Company Recommended by Your Real Estate Agent?

Written by Posted On Thursday, 08 September 2022 00:00

You have so many choices to make when you first begin your search for a new home in which to live. You'll pick out an area of town, for starters. Most often this area makes for a convenient drive to work every day. Maybe it's close to shopping and entertainment. Certainly nailing down where to live is your first move. You'll also need to decide what type of property to buy. 

Maybe you're set on a new single family home in the city or one of the suburbs. Perhaps rural life appeals to you most. Maybe a condo is more your style. Condos offer amenities that would otherwise cost the homeowner more. A swimming pool is a perfect example. A workout facility is also a common amenity. You'll also look for homes that fit within your budget. This will also narrow down where the home will be located.

You also have a choice where to obtain a home loan. You can start with your own bank or credit union. Perhaps some friends and family can provide some referrals for you from which to choose. You'll certainly have more than a few places to get a mortgage. But what about a mortgage company suggested by your real estate agent?

Most agents do keep a list of mortgage companies they like for their clients to use. It's common for an agent to hand out three business cards from mortgage companies. Should you consider one of these companies?

Many can sometimes get the wrong impression that the agent is getting some kind of referral fee and that's typically not the case. Real estate agents refer people to selected mortgage companies not because of any referral fee, but to help avoid a sudden problem right  before closing that will cause a problem and result in a terminated contract. 

No, these referrals are given because the agents have confidence in them. When they see a preapproval letter from a preferred mortgage lender, they figure there's very little likelihood the deal will fall out altogether. That's what agents fear most when their clients get a preapproval from someone they're unfamiliar with. Or worse, they are familiar with them but not in a good way.

Mortgage loan officers can solicit business from agents in hopes of getting a referral. Agents are typically happy to. They make sales calls to these agents in hopes of eventually getting a referral. When you do get a mortgage company referral, you too can have a level of confidence the deal will go smoothly from contract to close.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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