When you’re getting ready to start searching for a home to buy, one of the first things you need to do is get your financing lined up. This does a few things. First, it lets you know how much you can be approved for. Especially in light of the recent interest rate environment, if you started shopping several  months ago, stopped, then recently started up again, you’ll find your borrowing power has diminished due to higher rates. You need to get a handle on how much you can qualify for. 

This also accomplishes something else. It lets your selected agent as well as the sellers know you’re a serious buyer and not just another ‘lookie-loo’. In fact, the current practice for most real estate agents is not to even let you in their car to start looking at houses unless you’ve taken the financing step.

Mortgage lenders are pretty easy to find. First, your bank or credit union will have someone who can help guide you along the way. Friends and family may also have some referrals for you. But you soon find that you  have another source...your real estate agent. If an agent refers a lender or two to you, should you use one of those lenders? 

You should certainly start there. First, let me dispel something that some might believe. Real estate agents don’t get referral fees from the lender they’ve referred. Also note, a real estate agent who does refer a lender will rarely refer just one and instead provide you with two or three referrals. In fact, some real estate offices require agents who do refer lenders to refer more than one. But if the agent doesn’t receive any financial compensation from the lender, what’s the motivation? Why refer anyone at all?

The answer is peace of mind. An agent doesn’t refer someone who they don’t know very well. It’s quite the opposite. The agents do know the lender very well. Why? Because the lender they refer has provided a proven track record of 1) providing a solid pre approval amount and 2) the deal won’t fall through down the road. Your agent will do quite a bit of legwork upfront without any compensation and don’t get paid until and after the deal closes.

So, should you use such a lender? I most certainly suggest you start there. It just might give you some peace of mind, also.