If you are shopping for a new home, you’re probably working with a real estate agent to help find the perfect home for your family. And, trying to be helpful, that real estate agent may suggest a lender—or even a specific mortgage product—for you to get to help get you into the home of your dreams. But do you have to follow their recommendations?
The short answer to this question is simply, no. You are not under any obligation to work with the lender, the title company, or anything else your real estate agent recommends. And as we’ve mentioned before, it pays to shop around for a loan before you commit to any lender.
No matter your credit, the rates one lender offers you could be vastly different from the rates another offers you, and when you are making a purchase as large as a house, even a slightly different rate can make a big difference in what you’re paying over time.
The lender your agent suggests might be the best offer, but there is also a possibility that it might not. You will only know if you take the time to shop around. No matter what your real estate agent recommends, be sure to comparison shop before you agree to a deal with any lender.
Why is my real estate agent recommending a particular lender?
Recommendations may make it seem like your agent is working with—or getting kickbacks from a lender, which raises the question of whether the lender will work for your best interests or your agent’s best interests. The most important aspect of selecting a lender is making sure you have a lender with your best interests at heart, rather than a lender who is going to push you to close quickly in order to get your real estate agent their commission check.
Though the Real Estate Settlement Procedures Act prohibits most types of kickbacks involving real estate transactions, less scrupulous agencies can find ways around these legal restrictions. Kickbacks might show up hidden somewhere in the process; which is yet another reason to shop around to ensure you’re getting the best possible loan.
However, not every recommendation is hiding an underhanded scheme: many real estate agents simply recommend using businesses or services they’ve had good experiences working with in the past—and you may even find them to be the best choice. Just be sure you do your homework so you know they’re the best choice before you sign on the dotted line.
Why might I want to use the lender my real estate agent recommends?
For some individuals, especially first-time homebuyers, this is a matter of convenience. If you are not sure where to start on the home buying process, your real estate agent can be a great resource. Because real estate agents have been around the block more than once when it comes to buying and selling homes, they know the ropes and can help you figure out just what you need.
The one stop shopping aspect can also appeal—again, especially to first-time homebuyers who might not know where to go if left to their own devices.
What should I tell my real estate agent if I decide not to go with their lender?
Though you don’t have to tell your agent anything at all if you decide not to go with their lender, they might keep mentioning their preferred lender. The best way to turn them down is to simply state, politely and clearly, that you’ve chosen to go with a different lender. Remember you have no obligation to the lender your agent suggests, so don’t let them pressure you into a loan that you don’t feel is in your best interest to take.
In the end, the results you get from agent-recommended lenders will vary—so even if you feel good about your agent’s recommended lender, it’s smart to shop around and make sure, anyway.