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.
Senior Loan Originator
Ardain Mortgage Corp.
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!
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.
Best of luck.
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 !!!
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...
Senior Loan Originator
Ardain Mortgage Corp.
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.
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.
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.
312 77 BEALS
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.
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
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.