How (And When) To Change Your Mortgage Lender

Is it Possible to Switch Mortgage Lenders?

Consumer protection laws protect borrowers by allowing them to cancel any loan before it is issued. They won’t, however, merely transfer the mortgage to a different lender after the loan has been issued.

Can I switch lenders before closing or during underwriting? may be on people’s minds at various stages of the home buying process. Simply put, prospective home buyers have the freedom to switch mortgage lenders at any time before service is initiated. The only way to switch mortgage servicers after mortgage servicing or repayment has started is to refinance the mortgage.

When might switching mortgage lenders be a good idea?

A better home loan offer or a negative customer experience with your current lender are the two most frequent causes for switching lenders.

You May Receive a Better Offer

Usually, a borrower switches lenders because the interest rate has changed and they want to receive a rate that is lower than what the first lender offered. However, it’s crucial to make sure you’re taking into account all of the loan costs disclosed in the APR before moving forward with lower mortgage rates. You can determine if you’ll actually save money on your new mortgage by weighing all of the costs.

The process of purchasing a home is not always simple. As a result, before finalising a mortgage, you should take the time to understand your rates and related expenses. If you decide to refinance or find a better mortgage rate in the future, this will help clear up any confusion.

You’re Not Happy With Your Customer Service Experience

Poor customer service may be another factor in your decision to switch mortgage lenders. Poor customer service may result in unneeded or unexplained delays, inaction, lost documents, or an excessive number of contacts changes within the lending company.

What Steps Must I Take To Switch Lenders?

Get your mortgage preapproved by your new lender before switching lenders. The completion of this quick step typically occurs prior to the offer being made. If you already have a mortgage, you have likely undergone a preapproval process at least once. If you choose to switch lenders, you will have to go through this process once more.

Be open with your real estate agent and the home seller about the reasons for the change when looking for a new mortgage lender. If sellers don’t hear about the change from you directly, they might start to doubt your ability to obtain a mortgage. In addition, if your real estate agent is involved in the change of lenders, give them a new preapproval letter.

If you’re switching from a conventional to an FHA loan due to the FHA’s more stringent appraisal requirements, the home seller might become alarmed. In the end, communicate frequently and early with the sellers while being open and honest about your intentions.

What Consequences Result From Changing Mortgage Lenders?

Any choice you make during the home buying process carries some inherent risks, and switching lenders is no exception.

Lender Changes May Lead To Closing Time Delays

If you switch lenders after your offer has been accepted, the only real risk is that it might be challenging to close on time. Any delay could put the sale in jeopardy if the sellers want to close quickly, especially if the desire to switch comes later in the process.

A fresh credit check from a new lender

Hard inquiries are frequently used by lenders to check your credit, which could temporarily lower your credit score. Changing lenders will result in another hard inquiry, which could lower your credit score and raise the price of your new mortgage.

You might require a fresh appraisal.

You might have to pay for a completely new appraisal if the initial lender you selected to work with already had it done but the new lender doesn’t use the same appraiser. Before selecting to work with a new lender, it is important to weigh the additional cost of a new appraisal.

After the closing, can you switch lenders?

Most loans we close are serviced by Rocket Mortgage®.

Immediately following closing, some lenders might sell the borrower’s mortgage to an investor or another mortgage servicer. This keeps their money liquid and frees up capital. You may have been a borrower who was pleased with your lender and the assistance they offered, and you may be disappointed to learn that you won’t be working with them going forward once the mortgage is sold. The only way to switch servicers is to go through with a mortgage refinance. Remember that there are additional expenses associated with refinancing.

Additional Questions Regarding Switching Mortgage Lenders

When it comes to knowing when you can change mortgage lenders, there are a few other important questions you might have. Before deciding whether you can (and should) switch mortgage lenders, it’s critical to make sure you have all the information you need.

How late can you switch mortgage lenders?

It’s never too late to switch mortgage lenders; there is no right or wrong time to do so. However, you must realise that if you want to switch mortgage lenders after servicing starts, refinancing is your only choice. It’s wise to weigh the benefits and risks before taking any action, regardless of where you are in the home buying or ownership process. Consider carefully if now is the best time to make this change because switching mortgage lenders is a big commitment and could have an impact on your finances and credit score.

Changing lenders before closing is possible.

Even though it is technically possible, switching lenders before closing can slow down the transaction and change your closing costs. Before closing, switching lenders might necessitate a new appraisal and credit check. However, it might lead to a better offer and greater client satisfaction.

The underwriting process allows for lender switching.

It is now more typical to switch lenders during the underwriting process, but depending on the lender, this could again delay the closing and necessitate a new appraisal and credit check. Make sure this is the right time to switch by doing your research.

The Verdict: Making a change might be worthwhile.

Getting a new preapproval is the first step if you want to switch mortgage lenders. It’s critical to comprehend the costs involved in switching lenders, such as appraisal fees. Refinancing your mortgage is the only way to switch lenders after your mortgage has been serviced.

In our Learning Center, you can find out more information about the home buying process. You can learn more there about refinancing, purchasing your first home, and other topics.

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