If you are a real estate agent who hands out business cards for several lenders when you meet with potential home buyers, you may want to reconsider how you are approaching the relationship you have between lender and realtor. Once you are established in the real estate business as a real estate agent, you are often well served to work closely with only one lender. Why?
The mortgage lender can make or break any real estate transaction. It is important to really know your lender and his or her lending programs well to ensure that you both can get the deal to the closing table. Below are some of the reasons that both lenders and real estate agents can benefit by working closely together:
#1 Understanding the Loan Programs Available
It is always important for the lender and real estate agent to communicate regularly so that it is clear what type of loan programs are available. When the real estate agent knows exactly what loan programs the lender has available, this can make the approval and closing process go much more smoothly.
This is important because new lending programs come available regularly, and the current lending programs may have standards that change. For instance, an FHA-approved lender has access to loans that are ensured by the FHA. This program is often a good choice for people with lower credit scores and past credit problems. If the real estate agent works closely with the lender, this will make the deal go smoother if the realtor is aware of what the FHA credit-score requirements are for home loans that day.
If it turns out that the client’s credit score is too low for the loan, a lot of time is wasted on both sides. Good communication on both sides about lending programs available will help both parties to close more deals.
#2 Makes the Process Easier for First Time Buyers
There is a strong market in 2017 and beyond for first time buyers in the United States. Real estate prices are going up, the unemployment rate is going down, and home mortgage rates are still hovering around 4%, according to Freddie Mac. All of these factors mean that more renters want to buy their own home.
But, according to the National Association of Realtors, 45% of first time home buyers have stated that the mortgage application and approval process is harder than they thought. When the lender and the agent are communicating well, it will make it easier for the first-time home buyer to get approved.
For example, if the first-time home buyer is self-employed, he or she is going to need to have tax returns, a profit and loss statement for the year, and probably proof that he or she has been employed in the business for at least two years. The lender will likely need to see evidence of the business, such as steady clients or buyers that the self-employed person has. All of this proof requires extensive paperwork. A lender and agent who work closely together will be able to coordinate the submission of this information faster than an agent and lender who don’t communicate regularly. The faster critical documents can be submitted, the faster the loan can be approved and scheduled for closing.
#3 You Get to Know What the Lender Can Really Do
Most mortgage lenders will make big promises about fast approvals and being able to close a loan for almost any buyer. If you have been an agent for long and done enough deals, you know that there is a lot of talk and bluster out there. The fact is, getting a mortgage loan to close today is more difficult than a decade ago, unless the buyer has 780-credit and 20% down and has been in the same job for 10 years. Lending standards per new federal laws are stricter.
This means that some loans are harder to close than others. Getting a home loan to close quickly is often a matter of diligence on the part of the lender. The better you know your mortgage lender and communicate with him or her regularly, the more you will understand what is really possible. If you have a client with a 600-credit score and 5% to put down, this will be a harder loan to close than others. Knowing your lender well will increase the chances that the deal can close and not get hung up for weeks or months.
#4 More Clients Will Be Pre-Approved
Did you know that fewer than 10% of all buyers in 2014 were pre-approved for a mortgage? Realtors always prefer clients who are pre-approved so that they know that they can get financing on a house. If you are working closely with your lender, you will be able to ensure that any potential client you may work with has a home loan pre-approval. The more pre-approved clients you have, the more likely both you and the lender can get a deal closed and get paid.
To best serve buyers and sellers, it is important for the real estate agent and mortgage lender to work together and communicate well. This close relationship will not only ensure that good service is achieved: Both partners will also close more deals and make more money.
References: Loan Officers and Real Estate Agents. (2014). Retrieved from https://www.adwerx.com/blog/loan-officers-real-estate-agents/