- Unanticipated changes in terms of the loan or the associated costs
- Lack of response or poor service to customers
- Expired or missing documentation and documents
- Alterations to the people with whom you are collaborating (e.g., loan officers, escrow agents)
You might perhaps get a better offer elsewhere as well. The mortgage rates are always changing, and every lender has rates, fees, and special offers. You could get a more alluring offer from a different lender if you were prequalified for your loan some time ago or if the market has been unpredictable, which might affect your eligibility.
The Downsides of Making the Change
Changing mortgage lenders is not without its drawbacks, one of which is the possibility of delays. When applying with a new lender, you will need to begin the application process from the very beginning. This will require you to resubmit paperwork, perform a credit check, and fulfill any and all other loan terms the lender gives. The closing process may often take anywhere from forty to sixty days, so including this in your homebuying timetable might add another month or more.
Because of the delay, you may end up breaking the sales contract terms, which might result in the complete loss of the home. You will need to submit a request to have the deadline for your sale extended to proceed. For these extensions, the seller may, in certain circumstances, charge you a fee that is often referred to as a per diem. Other disadvantages of switching include the following:
A different rate
If you could lock in a low-interest rate with your previous lender, your new lender is not required to honor that lock. A new rate that considers the current market conditions and your credit score will be sent to you as an offer. Your interest rate can be greater than your previous loan, depending on how things play out.
A rise in the expenses of shutting
The charges associated with closing are quite variable from one lender to the next. Your new lender may charge you extra fees in addition to charging you greater interest rates than your former lender did. Before deciding to transfer lenders, thoroughly comparing all fees associated with each option is essential.
A further review of your credit history
Your prior mortgage lender probably accessed your credit report before beginning the process of processing your loan. This is a challenging query, and as a result, there is often a minimal negative influence on your score. This might affect the interest rate your new lender can give you, particularly if you are on the cusp of falling into a higher or lower credit category. Your interest rate is strongly dependent on your credit score.
Investing money into a fresh appraisal
Lenders demand assessments before giving a loan. These guarantee that the lender may collect the money they loaned to you if you do not repay it. If you have already paid your previous lender to perform an appraisal, that payment may not transfer to your new mortgage company. As a result, you may be required to pay for this service again and any other expenses that you may have pre-paid with your previous lender.
Picking Out Your Financial Lender
Despite these potential drawbacks, switching mortgage lenders might still be financially beneficial. However, make sure that you choose your new lender carefully. Do some comparison shopping to get the lowest rates, and evaluate each lender based on customer service, closing expenses, and other fees. Once you have chosen a new lender, ensure that all relevant parties are informed about the specifics of your new loan. This includes your real estate agent, the seller, the escrow agent, and other relevant parties. To make the adjustment official and legally binding, you probably need to include an extension addendum in the sales contract.
