Should I Listen to a Real Estate Agent or a Home Loan Officer?

My home loan officer is trying to convince me to buy points on my mortgage, while my real estate agent is warning me about keeping enough in our savings to be able to furnish the house the way we want without being financially stressed. The agent is even willing to admit that dollar-for-dollar it might make sense, given that we plan on staying in the home for a while. But he also says in his experience people always underestimate their move-in and decorating budget. We’re still pretty early in the home buying process, but I agree it’s never too early to be thinking about these things. So, it’s not even so much that they’re disagreeing on the finer points—and they’re definitely being polite/professional in the ways they’re disagreeing—but either on this particular point or in general, do you think it’s usually better to listen to your real estate agent or your home loan officer? (Note: My friend says this wouldn’t be happening if I had gotten a recommendation from a realtor about a home loan officer or vice versa, but because I found them independently, something like this was more likely to happen.)


Dear Nadine,

When it comes to home buyers and the process of house selection, buying and financing can be a daunting task. A home buyer should consider a lender recommended to them by their realtor. Most lenders can be deceiving, but a real estate agent wants to close the deal smoothly without hiccups with the main factor being financing the arrangement. Real estate agents who close a number of deals have an experience with different lenders and hence they know the ones that would get the job done, this saves you from wrong financial advice and rude surprises. Should a buyer take the advice of buying mortgage points?

If your lender recommends the buying of points on your mortgage, most of the time it is misleading. Buying mortgage points is always a losing proposition. In most cases, homeowners do not keep their mortgage long enough to be able to do more than recoup the upfront cost of paying points. Mortgage points have a lot of cons that come with them. Each point cost 1% of the loan amount and hence reduces the interest rate from one eighth to one-quarter of a percentage point. One should really consider everything carefully before buying points.

One of the main points of buying points is that the interest rate goes down. In the case of interest rates declining to the point that there is an available loan without closing costs at a price below the one you purchased, then the value of the points you bought becomes worthless. If the buyer refinances then they would give up a loan that costs more than what they made in reduced interest savings. In the case the buyer remains in the loan then, they would miss out on the available lower rate.

Upfront costs are yet another disadvantage. Normally the cost of points are wrapped into the loan balance and repaid in time until the loan is fully paid. If a buyer doesn’t have enough equity in their house to increase the loan balance, then they come up with the cost of the points at the end.

The break-even period is the amount of time it takes for the monthly savings due to pay the points. Moving and refinancing before the break-even point results in buyers paying more in points than reduced interest. No matter what a buyer decides to do, education of the entire process is key.