Real estate agents' role in the mortgage application process
(2/11/2013) - Home buyers who rush off to find a lender before checking in with their real estate agent are missing out on one of the most valuable services an agent offers.
Given the mortgage represents the cost of the most expensive acquisition most people will ever complete, it's key to get the assistance of an experienced home financing expert.
"A real-estate agent's role in the purchase and in finding correct financing is crucial to the successful close of escrow," said Carl San Miguel, president of the Santa Clara County Association of Realtors (SCCAOR).
While the lender is key during the application process and when it comes to funding the loan, a real estate agent can act as a point person helping the buyer prepare for the mortgage application mission.
Too many homebuyers focus solely on the agent's role as tour guide to help them find their dream home. However, agents typically won't begin the tours until a mortgage is pre-approved, thereby revealing the buyer has the money to buy and is serious about becoming a homeowner.
"An agent's role is to put all (mortgage) options for the buyer out on the table so they can make a decision that's right for them," said Carolyn Miller president of the Silicon Valley Association of Realtors and an agent with RE/MAX Real Estate Services in Cupertino, CA.
First things first
Real estate agents can initially help home buyers get all their docs in a row, including some of the most important first crucial documents - the credit report and credit score.
Credit reports are free from AnnualCreditReport.com, the score may cost $10 to $15, but it's worth the price of admission.
Your credit report will reveal if there are any errors or problems that could affect your application. Your agent can go over the report and score with you to develop a strategy to improve your credit score, correct errors or take other steps, if necessary, to put your report and score in the best light before the lender gets its hands on it.
Your credit report will also help the agent steer you to the least expensive financing you can find, based on your score and other factors.
"Many first-time home buyers want to use Federal Housing Administration (FHA) financing and a large majority of condominiums are not approved by FHA, so it would be a waste of everyone's time to even look at condos, if the buyer is only qualified to purchase using an FHA loan," said Rae Catanese, a real estate agent with Prudential Tropical Realty , in Tampa, FL.
Beyond good credit, buyers need to document employment, income, debt-to-income ratios, savings accounts, down payment sources and other mortgage qualifying factors. Agents also help buyers delve into these mortgage-underwriting factors.
Making the cut
"An experience agent will have an understanding of income ratio's needed to qualify for a loan and the financial institution most qualified to help structure the loan for approval," said San Miguel, also broker/owner of Highland Group Companies in Campbell, CA.
"There are different qualifying methods for different types of buyers, depending on their type of employment - employed vs. self-employed, salary vs. commission, fully employed vs. contract work," San Miguel also said.
Miller added, "Agents can educate the buyer by discussing types of mortgages. Each type has qualifications and down payment differences for financing. Together we can compare banks versus mortgage brokers. Agents can also provide buyers a list of documents/information lenders need to qualify buyers."
Once agents have an intimate knowledge of a buyer's mortgage profile, the agent can refer the buyer to a lender most likely to approve a mortgage.
Buyers always have the option of shopping around for the best rate and other terms, but the real estate agent's recommendation warrants consideration.
"When a buyer says they want to use a private investment company, say, like Schwab, we cringe. Yes, they can do mortgages and they may have competitive rates, but the tight guidelines are something buyers just don't get," said Julie Wyss a broker associate with Intero Real Estate Services, in Los Gatos.
A local mortgage broker backed up with refinances, inexperienced in the latest guidelines or slow handling contingencies, also can be bad news.
"The agent may choose to refer the buyer to a preferred lender, not for any financial gain, but because they know the buyer will be in good hands," Wyss said.
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