Doubling Your Mortgage Lender?

When shopping for a mortgage, you’ll compare mortgage rates, select a provider, and begin your application. But should you apply to more than one mortgage lender? There are several reasons why it might be a good idea to do this:

• To make sure you can get at least one mortgage approval
• You want to have a few offers to get the best mortgage rate
• You may find that you don’t like your lender

Here is more information on the pros, cons, and ethics of applying to more than one mortgage lender.

Check Rates Before Applying for a Mortgage (December 14, 2021)

Why you should apply to more than one mortgage lender

Okay, you should shop around for mortgage financing because you don’t want to leave money on the table, especially your money. Understood. But there are other reasons to scour the market for the best deals.

Will you be approved?

Different lenders have different standards. You may not be eligible for the Acme mortgage, but you may be eligible for AAA home loans. Not all mortgage applications are successful. According to Ellie Mae’s January 2019 Origination Insights report, “The closing rates for all loans rose to 75.0 in January. Refinancing closing rates rose to 69.5% in January, while purchase closing rates rose to 78.1% in January. “

At first, it may seem strange that you can get approval from some lenders but not others. After all, isn’t a VA loan from one lender the same as another? And the same with FHA financing and compliant mortgages that have to meet Fannie Mae and Freddie Mac standards?

Related: Turned Down a Mortgage? Here’s what to do next

In each case, the basic loan requirements are the same, but lenders may impose additional qualification requirements. They call these added requirement overlays. And they are very common.

The VA, for example, explains that it has “no minimum credit score requirement. Instead, VA requires that a lender review the entire loan profile. Although the VA does not have a credit score requirement, a lender that offers VA financing could. One lender can accept VA borrowers with a credit score of 640, while another needs 660.

The right program

If you’re concerned about getting your mortgage approved because of your credit rating or debt-to-income ratio, you can turn to FHA financing. FHA home loan programs are known to be more flexible. However, mortgage insurance for these loans can be considerably more expensive than that required for a Fannie Mae or Freddie Mac mortgage.

You may, in this case, want to apply for both programs. if you get the Fannie Mae loan, and it turns out to be cheaper, congratulations. And if not, you still have the FHA loan to rely on. Much like college applicants who pursue their dream school but also apply to a “safety school” in case they don’t go to their preferred institution.

And the best rate?

Everyone wants to get the best mortgage rate and the best deal. That said, a little caution is in order.

The “best rate” depends on many factors. The best rate for Ms. Green may be different from the best rate for Mr. Johnson. This can happen because Ms. Green has a better credit score, saves more, has greater savings, and finances with a fixed rate loan instead of an ARM. In addition, mortgage rates are always fluctuating; they are constantly changing.

Mortgage buyers should look for a lender who can offer the best rate available to the borrower at the time of application. You cannot know the best rate available without checking with several lenders.

What about the costs?

In addition to the interest rate, you need to consider the costs of the loan. Some lenders just charge more or less than others, even when the rates are the same. Check the Annual Percentage Rate (APR) on the official loan estimate form to compare lender costs.

Float or padlock?

Some borrowers prefer to lock in a rate because they know that interest rate will be available to them at closing. Others prefer to let the rates float, to get whatever is available at the close.

There are several alternatives.

First, close with one lender and float with another.

Second, talk to multiple lenders and lock in rate offers that have a “float down” feature. This usually means that if the rate drops at least 0.125% or 0.25% before the close, you can get the lower rate. Make sure you know the details of the floating arrangement, they may differ between lenders.

Is it unfair to shop?

It is sometimes claimed that by shopping you are forcing loan officers to work for free. The timeliness of making a mortgage offer is how lenders make their money, it’s a risk that comes with business. Alternatively, if you MUST accept the first mortgage offer you received, you could very well get a bad rate and bad terms.

However, having two lenders do all of the work associated with making loans and then ultimately picking one at the time of closing is usually not worth doing.

On the one hand, you will have to pay two assessments, two credit reports, and maybe other fees. And that will probably make you uncomfortable, as there is a big difference between being prequalified with a lender, which can take a few minutes, and having them play a whole show for free over several weeks.

When to shop

If you want to shop around among mortgage lenders, ask each to send an official loan estimate form for your consideration. This standard form shows what the lender is offering and can be compared to other offers. You don’t have to accept an offer, but be aware that if you miss a good offer, it may no longer be available.

Alternatively, you can have a broker shop for you. Retail loan officers work for one lender, while mortgage brokers seek financing from many lenders. For some borrowers, the lending process can be made faster and more understandable by working with a mortgage broker, someone who is familiar with the market and how it works.

If you’re going to check with multiple mortgage sources, it makes sense to include a mortgage broker in the mix.

Check your new rate (December 14, 2021)