If you’re on the hunt for a new house, you probably have a good idea of the house you want. But while that might be an ideal starting point, it’s not the best way to commence your house-hunting process. Your first step should be to contact a realtor…or perhaps a mortgage broker.
It’s the one dilemma that all future homebuyers face: do they visit a realtor first or a mortgage broker first? Choosing the right one can set you up and streamline your home-buying process.
So which one is the right one for you? Let’s break it down for you.
Realtor vs Mortgage Broker: Who Goes First?
The Realtor
Going to a realtor automatically opens up the potential for you to find and make a bid for a home. Realtors have a wide range of tools that allow you to access homes that couldn’t be found in the usual way.
Significantly, they are the ones to handle all the hassles that come with buying a home: submitting the bid, negotiating on your behalf, advising you on the best course of action and ensuring that the finalization and transfer to you are complete.
So, here are the benefits and negatives of hiring a realtor first:
The Pros:
- Help you find the type of property you want that are currently available and their price ranges
- They help determine what types of properties you can afford
- Gives you a baseline of what you need to spend in order to get a house you want, particularly the down payment
The Cons:
- You and your realtor won’t have an accurate picture of what home you can afford due to no pre-approval
- You could be wasting time and money looking for houses outside your price range
Mortgage Lenders
From banks to private companies, mortgage lenders are the team that helps you know how much you can afford and what mortgage interest rate you’ll get. They do this by crunching the numbers: your credit score, income and debt. This will give you an overall picture of how much of a mortgage you can afford.
So, here are the benefits and negatives of hiring a mortgage lender first:
The Pros:
- You’ll get a pre-approval or a pre-authorization for a mortgage. The former is an estimate of how much you can afford to pay for a home, while the latter provides you with an exact dollar amount
- You will have a solid foundation to build your search on and minimize potential problems that can arise when trying to buy a house
The Cons:
- You don’t know what’s out there in the market
- The lack of information regarding prices for homes
Realtors Know Lenders & Lenders Know Realtors
Whatever you choose, you should always remember that in the mortgage industry, everyone knows everyone. It’s an industry built on contacts and relationships. And if you prosper with some client relationships, you’re bound to get recommendations.
That all means that realtors know plenty of lenders that can help you get pre-approval and lots of lenders know realtors that can help you find a house.
And before you think that there’s a deal on both sides to con you, that’s not the case at all. It’s completely prohibited. According to The Balance: “The Real Estate Settlement Procedures Act (RESPA) prohibits agents from receiving a “thing of value” from a lender in exchange for sending you its way, and it inhibits them from entering into quid pro quo arrangements that might not be best for their clients.”
In essence, realtors and lenders have to work in the best interests of their clients. And that means providing them with the best connections to either role.
There’s also the personal factor: if you are dealing with a realtor or lender that ends up causing you problems (or cons you), everyone’s reputation is damaged. And that’s a huge problem in an industry like this.
What Do the Experts Prefer?
Both mortgage lenders and realtors can work with various circumstances and situations; it’s their job and that’s part of the process. However, it goes without saying that they would like to work with people that have their affairs in order.
Realtors prefer to work with people who are pre-approved for a mortgage, as it streamlines the hunting and viewing process. For lenders, it also makes it easier to do their jobs as they can set up for buying a home within your range instead of squeezing you into a home.
As for the people themselves, according to a 2017 Zillow Group Consumer Housing Trends Report, “92% of all buyers that year were pre-approved and that 83% of those who worked with agents were pre-approved”.
The consensus is that you should go to a mortgage lender first.
What’s Best For You?
Ultimately, choosing where to start your search depends on your situation and what you want. However, based on the professionals, reports, and people, the best course of action is to hire a mortgage lender first.
Getting the pre-approval can set you up for success, making it easier to find a home that works for you. It also makes the job for the realtor easier, reducing their and your workload, providing you with the perfect window for finding a home.
Good luck with your search!
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