REALTORS® Provide Important Lender Connections
Most buyers in today’s home market need a mortgage to help pay for their new domicile. In fact, according to a report from the National Association of REALTORS® (NAR), 77% of buyers used a mortgage loan to finance their real estate transaction.
Unfortunately, financing hiccups are the leading cause of delays and canceled real estate transactions. Issues related to financing were blamed for 21% of contract delays and 7% of terminations, according to the NAR’s Confidence Index.
“Homebuyers who work with a REALTOR® can tap into their network to find a reputable and reliable lender who can make the financing process go as smooth as possible,” says Sarah Cole, board chair for the Greater Milwaukee Association of REALTORS® (GMAR). “REALTORS® have experience with all different kinds of lenders, loans and types of transactions so it’s smart to get their recommendations.”
Types of Lenders
Today, there almost limitless lender options, and that can be overwhelming. There are local, regional and national banks, credit unions, mortgage brokers and online providers like Quicken and Rocket Mortgage.
Understanding the difference between a mortgage lender and a mortgage broker is key. A mortgage lender is a single company that offers its own loan products. A mortgage broker is an individual or company that offers home loans from multiple lenders. A mortgage broker can research different lenders and products for easy comparison but is not involved in the loan’s processing or approval.
According to Tina Balaka, a REALTOR® and Sales Director with Shorewest’s South Metro Team, each type of lender offers a variety of products and manages the process differently.
For example, while the convenience of an online lender can be attractive, there are drawbacks.
“An online lender typically doesn’t provide a direct person or contact to work with,” says Balaka. “When an issue occurs or something is time sensitive, there’s no one on the other end who really knows the buyer or the loan. A buyer could be at the mercy of a chat bot or an 800 customer service number where there’s no personal relationship.”
Finding a Reputable Lender
When beginning the search for a lender, homebuyers often start with their current bank. A quick visit to the bank’s website provides information on interest rates, types of loans available, mortgage calculators, the loan application process and how to contact a loan officer.
A REALTOR® is another go-to resource. REALTORS® can recommend lenders who they’ve worked with over the years and who have proven themselves to be accessible, knowledgeable, communicative and efficient.
It’s important to know that, even if a REALTOR® suggests a lender, the REALTOR® doesn’t see any of the buyer’s financial information or loan documentation. That’s kept strictly confidential and remains between the buyer and the lending institution. REALTORS® also don’t receive any commission or incentives from lenders, mortgage brokers or appraisal, title or inspection companies.
What to Look For
When “shopping” for a qualified lender, Balaka recommends searching for someone who is experienced, connected to the community, understands the buyer’s specific needs and is committed to securing the best rate.
Having a sense of rapport, trust and communication with the lender is also essential. The lender should discuss how long the loan process will take, the best way to stay connected (phone, video or email) and who the loan officer will be. The loan officer assists with the application, oversees approval and serves as the main contact with the lending institution throughout the process.
“It’s so important to have a well-rounded conversation from the start,” Balaka says. “By paying attention to questions the lender asks, it becomes clear whether the buyer’s best interests are being taken into account or not.”
Red Flags
Balaka encourages buyers to be on the lookout for red flags during conversations with lenders.
Full disclosure and timeliness are imperative.
Beyond the interest rates, there are closing fees, points and commissions that figure into the cost of a loan. The lender should provide an estimate for the total cost of the loan upfront and clearly define what the monthly payment will actually look like.
Buyers should avoid working with lenders that aren’t transparent with this important information.
If a lender takes a significant amount of time to respond to questions or requests, that’s another red flag. The purchase process requires the lender to complete and file paperwork and information based on specific deadlines so the closing date is met. Lenders who are disorganized or tardy can cause problems and delays.
Types of Loans
While most people are familiar with a conventional 30-year fixed rate loan, a host of other options exist.
A loan from the Federal Housing Administration (FHA) is one of the most popular government loan programs for first-time homebuyers. Veterans can take advantage of the VA Home Loan program that offers competitive interest rates and requires no downpayment or private mortgage insurance. In Wisconsin, the Wisconsin Housing and Economic Development Authority (WHEDA) works with lender partners to provide an array of loan options for homebuyers in the state.
With so many choices available, tapping into a REALTOR’s network can help buyers find the best lender and loan that fits their needs.
“Buying a home and getting the financing are huge decisions that are also very time consuming,” Balaka says. “We’re able to provide referrals, answer questions and share our knowledge so buyers get a loan that benefits them and successfully closes.”
The REALTOR® Advantage
A REALTOR® is a member of the National Association of REALTORS®, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a REALTOR®.
Locally, the Greater Milwaukee Association of REALTORS® is a 5,500-member strong professional organization dedicated to providing information, services and products to help REALTOR® help their clients buy and sell real estate. Visit gmar.com for more information.