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Advice on where to go to get a mortgage. A borrower can always select a loan
provider by throwing a dart at the Yellow Pages. A referral is of value if it raises the probability
of a good outcome above that from throwing the dart. The four major sources of referrals are real
estate sales agents, other borrowers, Internet referral sites, and builders. Real Estate Sales
Agents: Home purchasers accept more referrals from real estate sales agents than from all other
sources combined. Sales agent referrals generally are to individual loan officers or brokers, as
opposed to firms. An agent with great confidence in a loan officer will continue to refer clients
even when the loan officer switches firms.
Sales agents have the same interest as buyers in completing transactions. Hence, they refer clients
to loan providers who can generally be depended upon to close on time. This is the agent's major
concern, and it is a concern of borrowers as well. Sales agents have no comparable interest in the
mortgage price or whether the borrower is placed in the right kind of mortgage. However, the agent
doesn't want the price to be so far out of line or the service provided so abysmal that the borrower
throws a fit and blames the agent. Other Borrowers: Referrals from other borrowers are usually based
on a single transaction. Internet Referral Sites: These Web sites provide price information for a
large number of lenders and mortgage brokers, usually listed by state. They also provide quick entree
to the Web sites of each loan provider listed. Builder Referrals: Builder referrals are usually to a
lender with whom the builder has a financial arrangement. Hence, they are suspect. In some cases,
preferred lenders price loans above the market and kick back some of the excess to the builder.
Self-Referrals: Responding to self-referrals (solicitations) usually is a bad idea. Not all lenders
who solicit are predators, but all predators solicit.