Do You Have Your Pre-Approval Letter Yet?
There is one item nearly every home buyer needs before viewing a property they want to buy.
It’s a pre-approval letter.
Most real estate agents won’t take you inside a home without that little piece of paper.
They require this so that they only show you properties that you can afford, and to see how serious you are about purchasing a home.
If you are not already pre-approved, or even if you are, the agent may strongly encourage you to work with his or her in-house mortgage lender — the one that works from inside the agent’s office.
Should you work with the recommended mortgage company? Does the agent have ulterior motives?
Maybe not, but it is good to be aware of how in-house lenders work and if you can get the best mortgage rates and service from these “preferred” mortgage providers.
Your Agent’s Lender Isn’t Automatically The Wrong Choice
An in-house lender is simply one that sits in the real estate agent’s office to field questions and offer loans to the agents’ clients.
The individual could work for any mortgage company that has struck a deal with the real estate company to have a presence inside the office.
There is nothing inherently wrong with lenders who share office space with real estate firms or who have a relationship with your agent.
In fact, there may be some advantages.
Having a lender and agent affiliation may be more convenient for you if you only have to communicate with one party. In addition, the following may be advantages for you.
- The lender is local and understands the area’s housing market
- You may score incentives from an in-house lender in new developments
- There will be constant communication between your agent and lender
If you’re buying in a new condominium community, you may have to use the in-house lender. New condos often don’t meet Fannie Mae or FHA condo guidelines, so a single mortgage lender will agree to lend there.
In this case, compare your loan rate and terms to market rates. It may not be worth paying a higher rate for a specific condo when there are other properties that do conform to standard lending rules.
Consider The Drawbacks Of An In-House Lender
It may not be in your best interest to work with a lender that has such close ties to your agent.
Some agents choose their preferred lenders because they get deals closed quickly and reliably. That’s also good for buyers, but the missing element in this equation is the loan cost.
The in-house lender may feel that they have you “buttoned up” as a customer. They may feel they no competition for your business. That confidence typically doesn’t prompt them to get you the best loan type, mortgage rate, and closing costs.
Maybe even more important, make sure the lending company offers the mortgage programs that suit you best.
If you have military experience, ask the lender if they offer VA home loans. If you have a lower credit score, an FHA loan can help you get approved more easily.
Home buyers in rural and suburban areas should ask about the 100% financing USDA loan that is specially designed for moderate-income borrowers in less-dense areas.
It’s a good idea to shop around for rates and loan programs, even if you think you are getting solid value from your real estate company’s lender.
No Obligation To Go With A “Preferred” Lender
Your agent could ask you to get pre-qualified or pre-approved with the in-house lender before home shopping. It’s okay to use this lender to get the initial pre-approval letter, even if you have no intention of using their services.
The additional credit check won’t hurt your credit score as long as you do all your mortgage shopping within a 14-day period.
You’re not obligated to finance your purchase with that lender, and no builder or seller can force you to use an in-house or preferred lender.
Even if you’re getting “special” incentives for using an in-house lender, it pays to compare the offer with those from other lenders – that deal might not be as “special” as you think.
Before applying for a home loan, let the preferred lender try to earn your business along with everyone else.
You can let them know when pre-qualifying you that you won’t decide on a lender until you’ve had a chance to compare several loan quotes.
No real estate agent is going to care about saving money on your mortgage as much as you do. And mortgage rates can vary a great deal between competing lenders.
Consider the in-house lender’s quote just one of many that you will receive before making a decision.
What Are Today’s Rates?
Interest rates on home loans have hit multi-year lows recently. Shopping around can get you even lower rates than the average.
Get a quote today, especially if you need a pre-approval in a hurry. The process takes just minutes to get started, and all quotes come with your live credit scores.