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In many home buying situations, your real estate agent will recommend a “preferred lender.” This is a mortgage lender they have worked with in the past and trust to provide clients with quality service. Or, they may have a referral partnership in place that ultimately benefits them both. Preferred lenders are very common when buying directly from a home builder, as well. They have a mortgage company or an in-house mortgage loan provider they want you to use, and they may even offer certain perks for using this lending source to fund your new construction home purchase.
The first thing to understand is you are in no way legally obligated to work with a preferred lender. The referrer may push you hard in that direction, but you always have the option to find your own mortgage lender. Having said this, there may be situations where working with a preferred lender is the best solution because of certain benefits they may offer because of the referral. It’s always worth exploring your options, weighing the advantages and disadvantages of each option, and getting some quotes before making your final decision.
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Here are some of the pros and cons of working with a preferred lender in Georgia:
Pro: Smoother Qualification
Working with a preferred lender could benefit you in terms of qualifying for your home loan. They may be able to offer lower mortgage rates or looser qualification standards because you are being referred to them from a trusted source. Using a home builder’s preferred lender or in-house direct lender may even allow for a faster approval and closing. They have a system in place that could make the qualification and closing processes go much smoother for a home buyer.
Con: Limited Mortgage Products
One issue you should be wary of with direct lenders and preferred lenders is that they may only offer a limited number of mortgage products. This could reduce your options and you may not end up with the best loan. This is especially true if you are looking for a buyer-advantaged loan like an FHA loan, VA loan or USDA loan that will require special certifications for the mortgage lender. A preferred lender may only offer their specific mortgage solutions. This is why it never hurts to shop around. Talk with different lenders and GA mortgage brokers before committing to a preferred lender.
Pro: Faster Closing
We mentioned this above, but it is often a perk that comes when working with a home builder’s in-house lender. They can often get mortgage loans approved and funded faster than outside lending sources, and that may be appealing to you as a Georgia home buyer.
Con: Referral Partnership
In many cases, a preferred lender has a referral partnership with the other party (your real estate agent/broker, for example). The agent gets a referral fee for every mortgage lead, or they regularly feed each other a certain amount of business as part of the mutual agreement. This is standard practice in the mortgage and real estate industries. It can be beneficial to a home buyer who doesn’t have other leads, but it’s not always in your best interest. Understand the referral relationship. Don’t be afraid to ask questions. And, don’t feel like you are locked into any preferred lender just because that’s who your Realtor® recommended.
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Pro: Convenience
Oftentimes, home buyers opt to use a preferred lender simply because it is the most convenient option. You get a referral and you trust the person who referred you. It can minimize a lot of stress of shopping around for a mortgage lender. Just keep in mind the easiest solution isn’t always the best.
Con: Additional Fees and Costs
This can work both ways. Working with a preferred lender could end up costing you more with additional fees, taxes and other closing costs that another mortgage lender might not charge. Or, you could ultimately save a little bit because a preferred lender waives some of these fees. The important thing to remember is to ask for detailed payment breakdowns and get a full list of closing costs. Compare these quotes with those from other GA mortgage lenders and brokers to find the best option.
If you are buying a home in Georgia, contact Moreira Team | MortgageRight as one of your options to consider. Let us help you compare quotes and find the lending solution that is best for your specific home buying situation.
