Financing in 60622>Question Details

Bob Sanders, Home Buyer in Chicago, IL

Can I switch lenders after putting in an offer?

Asked by Bob Sanders, Chicago, IL Sun Feb 6, 2011

We are considering putting in an offer on a short sale. We can get a letter or pre-approval from one lender, but because nobody is sure when the deal might close (if it even does), I am not sure I will be able to close before the rate I have locked in expires. So here is my question. Say the lock-in expires after 60 days, would I be able to shop around for rates from other lenders without the entire contract falling through?

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I made an offer on a house after receiving a pre approval letter from a lender. I have perfect credit. Now I have spent the last 60 days waiting for my closing because I can not get a final approval from underwriting with the bank I am working with. I had appraisal done and that resulted in me spending $400 on stair rails. Now underwriting says they don't like the comparables that were used in the appraisal and are asking me to pay another $600 for a new appraisal. My question is this. If I change lenders can I use the appraisal and inspection I have already paid for or will I have to start all over and pay for all these things again. How does one "shop for a loan" when you don't know if you are truly approved until you lay out money for these things? So far I have spent $2500 and still do not have a yes for my mortgage even after being given a pre approval letter. I am currently renting and have demonstrated that I can pay more than my monthly mortgage payment will be and have a very high credit score. I have a house in another state that is providing additional income but they made me get an appraisal on that one too. Does this sound right? I am starting wonder if I am getting ripped off. Please help.
0 votes Thank Flag Link Thu Apr 7, 2016
Yes you should have back up lenders in place if anything happens or you could lose it altogether. Check out The Lenders Network they have several reputable lenders they work with that close in 30 days they do home loans down to a 580 score too..
0 votes Thank Flag Link Fri Jul 26, 2013
Yes, you can choose a new lender. I work with many first time home buyers and there are down payment assistance programs that might fit your needs. Joanna Weiss 773-327-3580
0 votes Thank Flag Link Thu Jul 25, 2013
Hello Bob,

Just following up with your question...
Were you able to save your rate lock?
If you have questions please do not hesitate to call/email me anytime.

Steve Smither
Senior Loan Originator
Ardain Mortgage Corp.
847-942-5151 Cell
847-963-1000 Office
Web Reference:
0 votes Thank Flag Link Tue Mar 8, 2011
Hi there, Bob!
Thanks for the question.

The short answer is - Yes. You will be able to shop around and finance your home through the lender who gives you the best deal and you will be able to keep shopping around.
Short sales are complicated for many reasons - including the lack of certainty regarding closing time and contingency on bank approval of the sale. Do you have a real estate agent assisting you with your search and with your short sale offer? If not, you should definitely find an agent to assist you with your transaction - including questions like this one. A reputable real estate professional with experience assisting clients with short sales will be able to anticipate the pitfalls you may face and help you navigate them successfully!
Web Reference:
0 votes Thank Flag Link Tue Feb 8, 2011
Yes you can. I would not have locked your loan until you get an approval from the sellers lender. There are some timing issues put in place to protect borrowers now so last minute changes would probably not work well in the time frame of a short sale.

I just completed a short sale where the buyer jumped ship from the original lender. We only closed 2 days before the auction and that is with all parties frantically trying to pull it off. Had the buyer gotten the wrong lender my sellers would have lost their home to auction. That would have been very sad.
0 votes Thank Flag Link Tue Feb 8, 2011
You can, but not always a good idea depending how much time is left and your close of esrcow. Talk with your agent, take advantage of their years of experience, they have had many transactions to pull from.

Best of luck.
0 votes Thank Flag Link Tue Feb 8, 2011
Yes Mr. Sanders - you can change lenders up to the minute before you sign your papers at the closing table. Whether it makes sense to do so is another story - but you absolutely have the right. to do so. Also, you generally are not allowed to lock in a rate until you have a full Loan Application and Completely Executed Sales Contract submitted to the lender. I would bet 99.9999999% that you will not close a Short Sale in 60 days if you do not even have your offer accepted.

FYI: One of my specialties is 203K Loans - which is an FHA Loan that allows 3.5% Down Payment - AND allows you to finance both the Purchase Price and Renovations all in one loan. Renovations can be major like completely remodeling the kitchen and bathroom ....... or as simple as including Carpeting, Painting, and/or Appliances. If this is something you might be interested in - I would be happy to provide you additional information. We are the 3rd largest FHA / 203K Mortgage Banker in the country and have the experience to get you what you need. Good Luck with your purchase !!!
0 votes Thank Flag Link Tue Feb 8, 2011
Good answer Jon...
You most assuredly can change lenders but I would speak to your current lender first to voice your concerns.
Give him the first chance to address them...

Steve Smither
Senior Loan Originator
Ardain Mortgage Corp.
847-942-5151 Cell
847-963-1000 Office
Web Reference:
0 votes Thank Flag Link Tue Feb 8, 2011

This is not legal advice, but here is the way i see it working in Illinois. Unless you are writing offer to listing agent as a disclosed dual agent, you should have a local Realtor you trust help you construct your offer.

In order to get a rate lock you need to make formal loan application and pay loan application fee. Standard Illinois MRED purchase contract language has the buyer obliged to make formal loan application withing five business days of contract acceptance in order to have the mortgage contingency activated. A short sale has a contract acceptance date whenever the seller signs the offer, not when the bank approves it. If you do not make formal mortgage application you automatically waive the right to use that contingency and if you can't get a mortgage for any reason you could lose your earnest money . The bank is out of pocket on the appraisal fee and opening the file, don't expect them to graciously let you shop for a better rate to save an 1/8 or 3/16% because the rates went down a bit. They probably will keep the application fee and charge you for the appraisal. Then your next lender can't use the appraisal ordered by the first bank you paid for and you you have to pay another appraisal and application fee. Long rate lock protection is expensive, if you wanted 6 months your rate will be well above current market rate. I think lenders have figured out that a clever guy could have a long rate lock, sign for it and then when it looks like the short sale is approved, change lenders that would not charge the rate lock premium and ditch lender number one. If, of course six months from now rates go higher, you stick with lender #1, if rates stay same or lower you bolt.
0 votes Thank Flag Link Tue Feb 8, 2011
Yes you can switch lenders. I would hold off locking anything in until you get an approval from the bank though.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
0 votes Thank Flag Link Mon Feb 7, 2011
You can indeed switch lenders, but will likely be out any upfront costs that you have incurred. Having been on the the receiving end of a double application, I would recommend speaking with your current lender to see if they can accomodate. They have no doubt devoted some time to you and unless they have not performed, it would be fair to give them a shot at retaining your business.
Web Reference:
0 votes Thank Flag Link Sun Feb 6, 2011
Hey Bob,

While you're able to change lenders at any point in time during the approval process, you will most likely run into issues switching lenders after the mortgage contingency has past (the date you need to provide a clear-to-close mortgage commitment). You would also be subject to forfeiting your application fee.

Separetely, I'm not sure why one would lock in the interest rate for 60 days knowing that the seller's bank has not approved the short sale purchase price (ask your realtor about "pre-approved short sales"). However, if the rate lock was in jeopordy of expiring, the loan officer should be able to present their rate lock extension and/or re-lock policies to you.

0 votes Thank Flag Link Sun Feb 6, 2011
Look at the contract. If you specify a certain lender in the contract, you could be in default if you use a different lender. In California, that is not the norm. I do not know how contracts are written in Chicago. Ask your Realtor.
0 votes Thank Flag Link Sun Feb 6, 2011
Typically yes.

Another option is to let your lender know that if they don't extend your rate lock, you may be forced to entertain offers from other lenders. Neither you or the lender have control over when the deal can be closed.

Wayne Beals
Keller WIlliams
312 77 BEALS
312 772-3257
Web Reference: http://WWW.WAYNEBEALS.COM
0 votes Thank Flag Link Sun Feb 6, 2011
It's a bit odd that you would lock into a rate before you found a property and before you actually wrote an offer, but you are not obligated to use the lender. You just need to get a loan based on the cirteria you enter on the offer. Rememebr that if/when the loan is approved by the lien holder, that lien holder will require that the closing occur ASAP. They are really very obnoxiously arrogent about this. It takes them 3-6 months to respond, but when they do then you and everyone else must drop everything and do what they say and when they say it.
Remember also that many agents representing the seller on a short sale try to lock you into the contract for an unreasonably long time frame, because it is to their advantage-not yours, as you might find someting better in a month or two while waiting. The listing agent also may require you to start the loan process/inspection etc BEFORE you even know whether the lien holder will approve the deal. This is really obnoxious and rather silly. I have had buyers walk away when the other side tried this. They should be happy just to get an offer because if they do not get one the short sale will eventually become a foreclosure and seller gets hurt worse and the listing agent gets zero.
My web site has some lender references if you want to shop around.
0 votes Thank Flag Link Sun Feb 6, 2011
Yes, you can switch lenders after the offer is accepted, as long as your new lender has enough time to approve you and lock in your loan. That will depend on when your closing date will be. You won't be penalized and the contract shouldn't fall through unless you don't give your new lender enough time to get your loan locked in.

I may be wrong, but I thought you couldn't lock a rate in until the BANK approves the short sale. Anyone know?

Conlon: A Real Estate Company
0 votes Thank Flag Link Sun Feb 6, 2011
Hi Bob, of course you can switch lenders any time you want. It does help to be aware of potential concerns if you do switch. When I am representing a seller I always call the loan officer after reading the pre approval, making sure he has pulled a buyers credit, verified the source of funds for the downpayment, looked at your tax returns and confirmed your employment. If he confirms the above and an appraissal is ordered in a timely manner, there should be no worries. Concerns pop up from lack of communication between agents or attorneys and lenders. Mortgage contingencies are time lines to have financing approved by the lender, if extensions are asked for without explanation then everyone sees red flags waving, so just keep in mind your mortgage contingency period, if switching doesn't change those dates everything should be cool.
0 votes Thank Flag Link Sun Feb 6, 2011
Good Afternoon Bob;
The pre-approval letter does not obligate you to use that lender.
You can change the lender at your discretion as long as you can live up to the terms of the contract.
Web Reference:
0 votes Thank Flag Link Sun Feb 6, 2011
If you are unhappy with the lender, I do not think that there is an issue with this. Why not ask the lender that you are hoping to switch to if they know if it is not breaching anything? I have a referral list with a few really great lenders to work with if you are interested.
0 votes Thank Flag Link Sun Feb 6, 2011
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