Homebuyers work closely with both a mortgage lender and a real
estate agent to make sure they find the right house and get the
proper financing. Realtors often develop relationships with lenders
so they can recommend a professional who they trust to provide
excellent financial service to their customers. Some real estate
companies go a step further and develop an in-house lending program
or an affiliation with a
in order to generate more revenue and have greater control over the
There are both advantages and disadvantages to working with an
in-house lender, so
should always compare offers from multiple lenders before
committing to a lender or a loan.
Advantages of in-house lenders
Steve Adamo, president of Weichert Financial Services in Morris
Plains, N.J., a division of Weichert Realtors, says that consumers
prefer one-stop shopping for a home and a loan.
"We put local lenders in our real estate offices so they can
have face-to-face meetings with buyers," says Adamo. "The big
advantage to buyers is that the lender and the buyer and the
Realtor are in constant, coordinated communication."
Adamo says that an in-house lender can give borrowers a clear
road map to prepare them before they make an offer on a house and
can consult with them throughout the buying process.
Suzanne Schakett, senior vice president of strategic alliances
at Envoy Mortgage, a private lender in
, says that in-house lenders often have a formalized communication
process to keep the buyer and Realtor informed on a daily or weekly
basis regarding the status of the loan application. While all
lenders are focused on getting a loan to settlement, the additional
pressure of their relationship with the real estate brokerage can
help move the transaction forward more quickly.
Disadvantages of in-house lenders
Whether in-house lenders actually process a loan faster is
"There's a sense of implied control over the loan, although the
reality is that's just a perception and an in-house lender doesn't
really have more control than any other lender," says Schakett.
"All lenders have to work with underwriters to get a loan
Also, Schakett says marginal borrowers may want to think twice
before working with an in-house lender.
"In-house lenders have a good amount of volume and a different
compensation structure because business comes to them directly, so
sometimes they don't roll up their sleeves to work really hard with
someone who needs to explain a period of unemployment or perhaps
has a credit ding as a result of a
," says Schakett. "Some in-house lenders don't have the time or the
same skill set as a lender who's hungry to hang onto every
Marginal borrowers may be better off trying a community bank or
a mortgage broker, says Ron Alba, vice president for mortgage
finance and senior regulatory counsel for the American Bankers
Association, a trade association in Washington, D.C.
"Most in-house lenders depend entirely on the secondary mortgage
market to buy their loans, while some community banks and larger
banks have programs that they'll keep in their portfolio and
service themselves, which means they can have more flexible
guidelines," says Alba. "Credit challenged borrowers would be
better off shopping around and getting quotes from several
Alba says that not all in-house lenders offer the same variety
of loan programs, like FHA or VA financing, for example, as
independent lenders, although he says most lenders have a similar
range of loan products.
In-house lenders may or may not have lower fees than private
lenders, which is another reason borrowers should shop around.
"Buyers should ask specifically what the relationship is between
a lender and a Realtor," says Schakett. "If the lender just has a
marketing arrangement with the Realtor, then the customer isn't
likely to pay higher interest rates or fees. On the other hand,
sometimes when companies create their own in-house lending entity,
the fees and rates will be higher because the company wants to
benefit financially from the arrangement."
"The general rule is that whatever price quote you get from an
in-house lender, you should take it to at least one other lender to
compare it," says Alba.
Homebuyers should get Good Faith Estimates from several lenders
to make sure the loan rates and fees are comparable, and then,
Schakett suggests, you should go with your gut and choose the
lender you trust. To learn how your interest rate will affect your
monthly payments, plug your figures into a mortgage payment