Should You Talk to a Lender First or a Real Estate Agent?

A couple using a laptop and cellphone talking to lender about a home loan.
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There's a bit of debate about whether you should talk to a lender first when you decide to buy a home or to a real estate agent. There are pros and cons to both options, but the bottom line is that while your loan is important, your real estate agent is even more important. Your mortgage is actually just a part of a large transaction.

What you absolutely don't want to do is find a house first, even if that seems to make the most sense.

Good Agents Know Good Lenders

First, consider what's most expeditious. Your agent can help you find a mortgage lender much easier and faster than a lender can help you find a good agent. Most agents have a plethora of lenders in their referral database, and a group of lenders that they've personally worked with in the past.

Agents can be trusted to refer a mortgage lender with a proven record and who can close loans, while mortgage brokers might only refer agents who send them business, and this means nothing. It's not necessarily a declaration of professionalism or experience. Those agents could be—and often are—brand new and still learning the ropes.

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 this inhibits them from entering into quid pro quo arrangements that might not be best for their clients. The agent will know which lenders perform and which can be counted on to hold up closing.

You probably won't be privy to that type of information on your own.

An Agent Will Help You Pick a Lender

Your agent can also help match the loan you want to a lender who specializes in that particular type of financing.

Another advantage to choosing an agent before a lender is that your agent will probably refer you to a local lender. Buyers sometimes want to work with lenders who are in another city, or even in another state, but it's possible that you could be at a disadvantage during offer negotiations if your lender isn't local.

You don't want to lose your dream home because the listing agent has never heard of your lender.

Shop Around for an Agent

Don't be afraid to tell a potential agent that you're meeting with their competitors. They might wonder what else you're keeping from them if you don't share your intentions and they later find out. So just tell them. It's OK. Zillow recommends meeting with at least three agents before you lock in with anyone.

Statistically, however, most buyers don't do this. The National Association of Realtors has reported that 52% of first-time buyers took a recommendation from a friend and jumped right in, and two-thirds signed up with the first agent they spoke to without looking any further. One can presume that after one iffy experience, they were wiser the second time around.

Find Someone You're Comfortable With

Real estate agents are generally pretty busy, at least if they're making money, and this is the kind of agent you want to work with. Those who are busy generally have a good deal of experience, and their experience will help you to avoid problems. But liking the individual counts a great deal, too.

You might want to interview agents to determine who will be the best fit for you before you decide on someone. You'll be in an intimate relationship with this person for weeks and maybe months, so you'd better like whomever you choose.

Call an agent and ask for a 30-minute meeting at their office. You can interview over the phone, but in-person is better. Be upfront and explain that you're planning on talking to two or three agents before hiring someone. The agent will understand.

An Agent Can Help With the Best Time to Buy

A good agent can also help you figure out if the time is right for you to buy. You can toss about scenarios about moving to various communities and discuss the pros and cons. You can bounce ideas off your agent. They'll be your rock, your sounding board, and hopefully, a person you can trust.

Your agent will walk you through the home buying process from A to Z, and will hold your hand for as long as necessary. They'll be the most important person in your life until the day you close.

The Flip Side: Preapproval

Nothing says that you can't find an agent, then take a deep breath and get preapproved for a mortgage before you start looking for a home. In fact, the agent you select might even urge you to do just that.

The 2017 Zillow Group Consumer Housing Trends Report indicated that 92% of all buyers that year were preapproved, and that 83% of those who worked with agents were preapproved. The takeaway is that agents prefer that their clients get preapproved, according to Zillow.


Article Sources

  1. National Association of Realtors. "Following RESPA Rules." Accessed March 12, 2020.

  2. Zillow Group. "How to Choose the Right Real Estate Agent." Accessed March 12, 2020.

  3. "How a Real Estate Agent Can Help Buyers Choose a First Home, Mortgage, and More." Accessed March 12, 2020.

  4. Zillow Group. "What to Do Before Talking to a Real Estate Agent." Accessed March 12, 2020.