Homeownership 101: Who you’ll work with to buy a home
Finding and buying a home is a complex process, and first-time homebuyers may be surprised by how many people and companies will be involved.
Ryan Doughty, VP, Mortgage Lending Officer, has worked in the industry for over 25 years and helps explain who the different players are and what they do. Getting a handle on this early on can help you focus on what's most important— finding the right home.
What does a real estate agent do?
Your real estate agent will likely be the person you interact with most often. Your agent can help you understand the local market, show you homes, set expectations around offer amounts, submit your offers and negotiate on your behalf.
“I work closely and regularly with 20 real estate agents,” says Doughty. “When a buyer asks me for a recommendation, I’m happy to give them two to three.”
Doughty highlights how there’s never a single best agent for everyone. For example, the top agent for luxury homes might not be the best one for a starter home — and agents may specialize in certain neighborhoods. Try to find an agent whose experience aligns with your goals and who you can get along with over the coming weeks.
Also, be aware that a settlement agreement from the National Association of Realtors may lead to big changes in 2024. Although it’s unclear exactly what will happen, you may need to sign an exclusivity agreement with your agent and pay them a fee if you buy a home. Traditionally, the seller paid a commission that got split between the seller’s and buyer’s agents.
What do loan officers or mortgage brokers do?
The loan officer or mortgage broker is the person you’ll work with when applying for a loan. Loan officers tend to work directly for the lender that underwrites and funds your loan. Brokers act as intermediaries who prepare your application and then find a lender who will be a good fit.
At a bare minimum, you want someone who can explain the pros and cons of different types of mortgages and get your deal done on time. But also consider their personality and motivations. Doughty says that although brokers might be able to shop around and find you a good rate, there also might be higher upfront costs.
“I encourage buyers to reach out to two or three people. Have a conversation and see if that person is trying to sell you something or if they’re listening to your needs,” says Doughty. “Generally speaking, I think you get a simplified transaction when you're dealing with a loan officer.”
A loan officer from a local lender may also be more informed about down payment assistance programs and grants for buyers. Some lenders, including Old National Bank, also have assistance programs for eligible borrowers.
Who are the various home inspectors?
Doughty says that the best money a buyer can spend is for a whole house inspection. The inspector might spend hours looking over the major parts of the home, such as the roof and foundation, and checking small details, such as whether every electrical outlet works.
“Certain types of government loans, such as an FHA or VA loan, may require specific inspections,” says Daughty. “But most lenders don’t require you to hire inspectors.”
Sellers might hire inspectors and include the inspection reports in disclosure packets when listing a home. “But sellers might not know about issues, or they might not be honest,” warns Doughty. Hiring inspectors on your own can help you go into the transaction knowing exactly what needs to be done.
In addition to hiring a general inspector for a whole home inspection, you might want to hire an inspector who specializes in a particular area of the home or potential issue. These inspections might focus on the foundation, roof, pests, HVAC, chimney, septic tank, radon, electrical or plumbing.
How could the home appraiser affect your offer?
Your mortgage lender will hire an appraiser and use the appraiser's estimate of the home’s fair market value rather than your offer price to determine how much the home is worth. If the appraisal is higher than your purchase price, nothing changes. But if it’s lower than your offer, you might need to rethink the deal.
For example, if you offer to buy a home for $400,000 with a 5% down payment ($20,000), your mortgage will be for $380,000. However, if an appraiser says the home is only worth $390,000, you might need to increase your down payment by an additional $10,000 to cover the difference between the valuation and sale price.
“Online brokers might pick an appraiser who’s on their approved list but lives 90 miles away and doesn’t understand the nuances of the area,” says Doughty. He thinks working with a local lender who hires local appraisers can help you avoid potential complications.
Why does your home insurance agent matter?
Mortgage lenders will generally require you to purchase homeowners insurance, and maintaining a policy even if you don’t have a mortgage is often a good idea.
If you already have auto, homeowners or renters insurance, you could call your agent and ask for a quote on the new property. But this also might be a good chance to gather and compare policies from several companies.
“I suggest the same vetting process that you’d use for finding a real estate agent or mortgage lender,” says Doughty. “Get a few recommendations from people, talk to the agent, see what their premiums are and find out whether you want to work with the person.”
What will the title company do?
The title company won’t be involved until after your offer is accepted, but it plays an important role during the closing.
The title company verifies that the sellers own and have the right to sell the home, and it does a title search to make sure there aren’t any outstanding claims (called encumbrances) that could interfere with the purchase. For example, liens from past-due taxes or HOA dues. It will also conduct a survey of the property, issue title insurance for the lender and buyer and help manage the escrow account.
“The title company representative is also going to be the person that conducts the closing appointment,” says Doughty. They will walk you through the process, explain the documents you’re signing and hopefully answer any last-minute questions.
In some states, a real estate attorney will organize and oversee the closing instead.
Start building your home-buying team
Once you’re ready to buy a home, start interviewing people to build your team. Your real estate agent and loan officer are going to be the stars, and that’s a good place to start.
An experienced loan officer can help you understand your loan options and how much cash you'll need for a down payment and other closing costs. You can also get pre-qualified with the lender — an important step for making competitive offers. And your loan officer can recommend a local real estate agent who can help you narrow in on the neighborhoods and types of homes that will be a good fit based on your wants and budget.
Learn more about how Old National can help by connecting with one of our local mortgage experts.
