Transferring Lenders During The Mortgage Process
This guide covers transferring lenders during the homebuying and mortgage process from one lender to a different one. The mortgage process should not be stressful. All mortgages should not only close but should close on time. Closing delays happen in some situations, but they should not be due to the lender. Over 80% of our borrowers at Gustan Cho Associates are either stressed during the mortgage process or have a last-minute loan denial.
Homebuyers are dependent on the mortgage pre-approval by their loan officers. Not just home buyers but also real estate agents, attorneys, title companies, movers, and other third-party vendors. The first reason for stress during the mortgage process and delays in closings is the loan officer not properly qualifying borrowers.
Loan Officers should never issue a pre-approval letter if there is even a 1% doubt that the loan will not close.. Especially closing in time. Transferring Lenders during the mortgage process is very common. Transferring Lenders is a very simple process and is streamlined. Most Transferring Lenders during the mortgage process can be done in a day or two.
The Importance Of A Solid Mortgage Pre-Approval
The pre-approval step is the most important stage of the overall mortgage process. Homebuyers trust the home buyer’s pre-approval is solid. Unfortunately, loan officers in the mortgage industry still issue pre-approval letters without fully qualifying borrowers.
Borrowers then take the invalid pre-approval to enter into a real estate purchase contract. Due to the incompetency of the loan officer, the whole mortgage process gets railroaded. Homebuyers, sellers, realtors, attorneys, title companies, and even lenders will stress due to the sloppy pre-approval that triggered all this.
Homebuyers may lose their earnest money and appraisal fees. They often cancel their children’s schools and enroll them in the new school. They make arrangements and enroll their children at the new school. Sellers trust that the home buyer will close on the home purchase. The home buying and mortgage process can get ugly for buyers and sellers if the borrower is stressed during the mortgage process with an incompetent lender. Transferring lenders may be the only option to salvage the home purchase contract.
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How To Properly Qualify Borrowers Before Issuing Pre-Approvals
This paragraph is geared more toward loan officers. Loan officers should never issue a pre-approval letter unless they properly qualify their borrowers. Loan officers need to realize their borrowers and their families rely on them not just to close their home loans but also on time.
The steps that should be taken before issuing pre-approval letters: Make sure that the borrower meets all agency mortgage guidelines. Most lenders have lender overlays. Check to see if your employer has overlays that may affect your borrowers. Thoroughly review borrowers’ credit reports and ensure no credit disputes or errors on the report. Thoroughly go over line item per line item with the borrowers. Ensure there are no public records, such as judgments, tax liens, bankruptcy, or foreclosure, that are out there but do not report on the credit report.
All lenders will do a national third-party, public records search through Lexis Nexus and Data Verify. All public records will be discovered even though it does not report on the credit report. Income and debt-to-income ratios should be carefully reviewed. If there is any doubt with higher debt-to-income ratio borrowers, get a second opinion from a mortgage underwriter or order a Verification Of Employment before issuing a pre-approval letter. Make sure you get an approve/eligible per the automated underwriting system. Thoroughly review mortgage documents—especially bank statements. Review bank statements for irregular deposits, withdrawals, and overdrafts.
Main Reasons for Transferring Lenders During The Mortgage Process
There are many reasons for transferring lenders during the mortgage process by borrowers. Loan Officer does not return calls or emails promptly for days. Borrowers get conditional approval, and the underwriter keeps issuing new conditions after conditions have been submitted. The underwriter keeps on coming up with additional overlays after overlays. The lender has no regard for meeting the closing date. A last-minute mortgage denial gets issued after conditions are all turned in. Whatever the reason for transferring lenders during the mortgage process, it is very easy and streamlined to fire your current lender and hire a new lender to represent you.
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Steps In Transferring Lenders During The Mortgage Process
Transferring lenders from one lender to another lender is very simple. There is no cost in transferring lenders. A lender you fire cannot charge you anything, nor can they not let you not to transfer or re-apply with the new lender. Submit all the same documents to the new lender. FHA and VA Appraisals can be transferred.
Conventional appraisals cannot be transferred if a conventional appraisal has been done. The new lender will order a new conventional appraisal. Most new lenders like Gustan Cho Associates will expedite all transfers so the borrower can close in 10 business days or less.
Frequently Asked Questions (FAQs)
- Is it possible to change lenders while in the midst of the mortgage process?
Yes, switching lenders during the mortgage process is possible, but it can come with some challenges. It may depend on the terms of your original loan agreement. - Why would someone want to switch lenders?
There could be various reasons to switch lenders, such as finding a better interest rate, more favorable loan terms, dissatisfaction with the service provided by the current lender, or if the original lender encounters issues with the loan approval. - When is the best time to switch lenders?
The best time to switch lenders is usually early, ideally, before you’ve committed to one lender or signed a purchase agreement. However, it can still be done later in the process with some complications. - What are the potential drawbacks of switching lenders?
Switching lenders can delay the closing process, require additional paperwork and fees, and may result in a different appraisal and underwriting process. - Will I lose my earnest money if I switch lenders?
Generally, switching lenders should only affect your earnest money deposit if you can still secure financing within the agreed-upon timeframe outlined in your purchase agreement. - Do I need to reapply for the mortgage if I switch lenders?
Yes, you’ll likely need to reapply for the mortgage with the new lender. This means providing updated financial documentation and going through the underwriting process again. - Will switching lenders affect my credit score?
Switching lenders may result in multiple credit inquiries, impacting your credit score. However, suppose you complete the switch within a short period (typically within 30 days). In that case, credit bureaus often treat multiple inquiries for the same purpose (e.g., mortgage shopping) as a single inquiry. - How do I inform my current lender that I want to switch?
Coordinate with your current lender and inform them of your decision to switch. Be prepared for potential pushback or attempts to retain your business. - Can I negotiate better terms with my current lender to avoid switching?
Yes, it’s possible to negotiate better terms with your current lender to avoid switching. However, negotiation success depends on factors such as your creditworthiness, prevailing market conditions, and the lender’s policies. - What should I consider when choosing a new lender?
Consider factors like interest rates, loan terms, closing costs, reputation, customer service, and responsiveness when choosing a new lender.
For more information on the content of this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at alex@gustancho.com. Gustan Cho Associates Mortgage Group is available seven days a week, evenings, weekends, and holidays.
