There are a lot of people involved in the mortgage process and figuring out who does what can be overwhelming. Here are the basics of the key players.
If you decide to use a real estate agent to buy a home, you’ll have a buyer’s agent. This agent works exclusively for you, not the seller. The buyer’s agent can help you find the right house, negotiate the price, execute the sales contract, handle the escrow process in between signing the contract and closing on the home, and close the deal.
Buyers don’t pay anything for the buyer’s agent’s services. The seller pays a commission to the seller’s agent (also listing agent below) and the listing agent shares his/her commission with the buyer’s agent as agreed before they work together. Typically, the real estate agents split the commission, but each situation varies.
The listing agent works for the seller. This is the agent that listed the home for sale and sets up the appointments for buyers to see it. The buyer’s agent contacts the listing agent to ask questions about the home, set up a showing, and/or make an offer.
The listing agent represents the seller. He/she writes a description of the home, takes photos, helps the seller price the home and markets it to potential buyers. The listing agent also fields all offers from potential buyers, discusses them with the seller, and responds to offers according to the seller’s wishes.
You’ll need a lender to handle the financing of the home unless you will pay cash for it. This can be a big-name or a private bank, a mortgage broker, or a lender. You can find financing in person or online.
The loan officer (or loan originator) works for the lender, is your primary point of contact, and gets your loan from application to the closing table. All communication needed from the underwriter or processor will go through the loan officer.
The underwriter also works for the lender, but behind the scenes. The underwriter makes sure you qualify for and can afford the loan by evaluating your documents (income, assets, liabilities, credit, and more), and property information including the appraisal and title work. If the underwriter needs any more documentation or has questions, he/she will tell your loan officer.
The home inspector is an independent third party. Mortgage lenders don’t require a home inspection, but it’s recommended. It’s important to find an inspector with extensive experience and a reputation for being meticulous and reliable. Check the inspector’s credentials and online reviews. This report may guide your investment decision, so you want to work with someone you can trust.
The appraiser is also an independent third party and is required by the lender. The appraisal tells the value of the home, which the underwriter uses to determine if there’s enough collateral for you to qualify for the loan. The appraiser looks at the home’s overall condition, size, and features. He/she may find some issues with the home that would interfere with the loan’s requirements, but the appraiser’s assessment isn’t as comprehensive as a home inspector’s report, which is why it’s recommended to consider both.
The title company is a third party that handles a large part of your home buying process. The lender chooses the title company and uses them for a few roles.
- Title Search and Exam: The title company will research the home’s title history (e.g., who owned the property over the years). They’ll make sure the title has passed to each new owner legally and that no one could potentially still have ownership in the property. The title searcher also looks for any outstanding liens on the property outside of the current owner’s mortgage. If there are liens, the seller must satisfy them before the home can exchange hands.
- Title Insurance: You must buy a lender’s title insurance when you buy a home. Lender’s title insurance protects the lender against any claims of ownership or financial claims against the property after the title search. You can also buy owner’s title insurance. This protects you from any claims of ownership or financial claims against the property after the title search. The seller usually pays for the owner’s insurance and it’s a one-time fee as long as you live there.
The settlement agent is also known as the closing agent. At the closing, you’ll have the closing agent, your loan officer, the sellers, possibly the real estate agent(s), and the attorneys for both sides. The settlement agent will explain the closing documents, collect any funds due, disburse the funds to the right parties, and hand you the keys to your new home.
Some states do not require them, but most people have a real estate attorney when they buy a house. Your attorney works just for you (not the seller) and makes sure all aspects of the process go well. An attorney can review your purchase contract before you sign it, advise you during the escrow process, and represent you at the closing.
Buying a home is a huge investment, and there are a lot of people involved. It’s important to understand the role each person plays on your journey toward homeownership.