Realtor or Lender – Which Should You Choose First?

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 – with help from Summit Mortgage.

Buying a home is one of the biggest decisions you’ll ever make. Like many first-time homebuyers, you probably have a long list of questions, from determining the right time to buy, to understanding how much house you need. With so many choices to make, it’s not surprising that most people aren’t sure exactly where to start when buying a home.

Lenders and realtors work together every single day; they collaborate for countless buyers but their roles in the lives of their homebuyers is completely different. Simply put, lenders assist homebuyers/homeowners with the financing needed to purchase or refinance their home while realtors are going to help the person find the home they want to purchase and draw up the legal paperwork needed to secure an accepted offer on the home. Involvement of both parties is typically on nearly all transactions; the primary exceptions being someone purchasing a home in cash or buyers purchasing without a licensed realtor representing them.

Start with a Mortgage Lender to Understand Your Budget to Buy

When it comes to buying a home, it’s natural to think of selecting a Realtor first because we want to go see homes! This, however, can be putting the cart before the horse; how do you know what price of house you can qualify for if you haven’t yet spoken to a lender? One of the most important concepts to understand before you start looking at houses – even just online – is how much you can afford and how much you will ultimately spend beyond the cost of the house itself.

Tools like our mortgage payment calculator are a great way to start creating a budget, but borrowers also need insights from a seasoned mortgage professional. The lender will run and review your credit report and scores, review your savings and validate information relating to your income along with other factors to ultimately determine how much you can borrow. At the same time, your loan officer will explain any special home loan programs for which you may be eligible. Many individuals can take advantage of programs that reduce or eliminate down payments, or lower the credit qualifications for securing a loan, such as a VA, USDA, or FHA Home Loan. You may also be eligible for down payment assistance, which can play an important role in budgeting.

At this point, your loan officer can break down how large your down payment needs to be, address costs that are common to mortgage financing (such as interest and private mortgage insurance), and project a monthly payment (which includes principal, interest, private mortgage insurance, taxes and homeowner’s insurance). This is also a perfect time to discuss closing cost and prepaid taxes, insurance and mortgage interest. Most closing costs are typically paid by the buyer (unless negotiated otherwise), closing costs average 2% to 5% of the loan amount and are payable at the time of signing. With all this information in mind, you can set a realistic budget and address any financial issues that may keep you from getting approved for a mortgage.

Starting with a Mortgage Lender Improves Your Offers Acceptance

First-time homebuyers are often surprised by how much paperwork is needed to get pre-approved for a mortgage. You can expect to provide the following for you and any co-applicant:

• W-2 or 1099 forms
• Most recent pay stubs (covering 30 days)
• Recent tax returns (if applicable, usually two years)
• Preceding 60 days bank statements for all relevant bank, retirement, brokerage, and savings accounts
• Employer contact information to validate employment status
• Non-expired government ID

Some applicants may need to provide additional items as well. Gathering these documents can be time-consuming but doing so quickly is in your best interest. The sooner you provide a lender your documentation, the sooner you can receive a pre-approval letter. Pre-approvals make buyers more attractive to sellers and real estate agents alike, as it shows you’re serious about buying a home, and have already taken steps to have your application reviewed. Having all paperwork prepared at the start of the process can speed the finalization of your loan and keeps you from digging through moving boxes to find documents!

What else do I need to know about where to start when buying a home?

Once you’ve worked with a loan officer to get pre-approved, you’re ready to choose a Realtor. For first-time homebuyers, it’s especially important to choose an agent you feel comfortable with, as he or she will guide you through the buying process alongside your loan officer. Realtors also provide invaluable market knowledge. As local insiders, they can help you understand when it’s the right time to buy. They will pinpoint your home search, ensure you view properties that showcase your wish list items, and help you stay within your budget.

Whether you choose a realtor or lender first, following a few simple guidelines can help ensure a great experience. Don’t hesitate to ask plenty of questions, including:

• Are they local? Working with a local Realtor and lender helps provide a better understanding of the area’s market and the costs of buying a home. Look for a real estate agent with a history of work in the region and a mortgage lender that combines the power of a national reach with the expertise of local presence and program knowledge.
• Are they licensed? Both realtors and lenders must go through a rigorous screening and testing process in order to become licensed, they must complete continuing education each year to ensure they are familiar with market changes. If you ever have any doubt, dig in. Your real estate agent should provide their licensing information upon request. You can also confirm that your Lender is licensed to work in your state and review any possible regulatory action taken against them by visiting the NMLS Consumer Access site.
• Do they have excellent reviews? Don’t hesitate to request referrals and seek independent customer reviews. A long list of happy customers is a good indication that you’ll be satisfied with the service you receive as well.

Above all, make sure to choose partners who will be there every step of the way to answer questions and provide support. It’s critical that you feel comfortable putting your future home in their trusted hands.

Start your homebuying journey today!

No matter where your path to homeownership begins, Summit Mortgage is committed to helping you finance the home of your dreams. Ready to get started? Complete our Quick Start Form and we’ll connect you with a loan officer that matches your specific needs. They’ll provide a free consultation and guide you through every step of the loan application process from getting pre-approved to all your home lending options, so you’ll be ready when you and your Realtor find the perfect property. Apply for a loan or request a rate quote today.