Trusting Mortgage Referrals
When in the market for a principal mortgage, it can be difficult
to know who to trust. While you may be offered many referrals,
you have to look carefully and determine whether the person
suggesting a lender has a financial stake in your decision.
Not everyone who will give you advice is looking out for
your best interest. Let’s look at some of the referral
types and how to analyze them.
One of the most common referrals comes from real estate agents.
This is because home-buyers often develop a close relationship
with their agent while house-hunting, and are receptive to
their advice in the mortgage area. When it comes to a lender
who will close on time, the agent’s interests are aligned
with the buyer’s.
However, when it comes to interest rates, the agent has no
particular interest one way or the other. The agent doesn’t
want the rate to be so high that the buyer gets angry and
blames the agent, but has no real incentive to recommend a
lender with a particularly low rate. Lenders often attempt
to get on an agent’s good side. Though paying for referrals
is illegal, the law isn’t enforceable and may often
A recommendation or referral from a friend or family member
who has borrowed from a lender is often considered the most
trustworthy. The referral comes from a person with no financial
stake in your decision. However, you should make sure the
reference is based on solid information.
You should find out if your friend shopped before choosing
his lender. Also determine if the transaction was anything
similar to your upcoming one. Find out how well the lender
dealt with questions, and how reliable he | she was.
Finally, one of the most suspect referrals is one from a
builder who is constructing your home. Often, the lender and
builder have an arrangement whereby the lender provides a
higher rate and gives the builder a kick-back for the reference.
You can prevent this by shopping around to prevent the recommended
lender from charging above the average rate.