If you want to do this, you should tell them you are doing it so they can make the decision whether to continue working on your loan. If you don't tell them, you are no better than the dine and dashers that eat the meal and bolt without paying. Don't force someone to work for free, it's unfair and not anything you would want done to you.
Loan officers are the ONLY ones subjected to this business practice and it must stop one of these days. If you lock a rate, it is to protect both parties. It protects you from rates going higher and it allows the lender to allocate those funds. If you do what you are suggesting, you only care about your side of the deal. I cannot tell you how many times people try exactly what you suggest and end up getting burned. What happens when lender #2 with the 3.75% rate tells you they are ready to close, you break the lock you had with lender 1 and then lender #2 hands you a HUD with $5,000 extra in fees on it and they say your rate will be 4.25%. What are you going to say? Let me guess, you will complain that you had a "rate lock" and post here asking if you can sue the lender for breaking the lock. It seems rate locks are only sacred when the borrowers are the ones getting burned.
Pick an ethical lender, do the best you can to get the best rate and terms, lock your rate when it works for you and stop trying to always get better. At some point, good enough has to do.
KARMA is king!
Talk to the lenders. Be up front with them. Ask them what they could offer right now if you were ready to buy. Then go with the one that feels right to you.
A word of caution - there are many lenders who promise the earth but fail to deliver. Internet based lenders seem to be the worst in that respect. Remember that it is not just about getting the best interest rate. There is little point in working with a lender who is unable to close the transaction on time, if at all. You may also find that origination fees will vary significantly from one lender to another.
Your Realtor does not get any "kick back" from a lender. That is illegal. He or she will recommend lenders to you that they have worked with in the past and that are honest and reliable.
Bernard Gibbons, J. Rockcliff Realtors
DRE License # 01331583
Phone (925) 997-1585 - firstname.lastname@example.org
I understand your concern over getting the best rate possible, but you have many comments below that have explained how and why it hurts not only you but the lender if you drag it out beyond the rate lock. Shopping around for the best rate, fees, courtesy, knowledge etc. is fine, but once you have gotten to the point in time to lock your rate, I'm afraid I agree with the others.
I have been on the buying side with unscrupulous lenders and I know exactly what you mean when referring to the housing crisis. I am a real estate agent and a victim of it! However, I think the previous posts are trying to help you understand what not to do in order to avoid that type of lender.
Once you have chosen the lender, that lender is in touch with your agent, your title company etc. We develop a working relationship and 'get the ball rolling" so to speak. It can create all kinds of issues if you switch lenders part way through the process. There are many steps to climb and bridges to cross to get from point A to point B. You want to make sure that the professionals you chose to assist you in the process are on board with you and the others involved are working in your best interest. That would be extremely difficult to do if you were still trying to choose between two lenders.
So bottom line, do your research and shop around, but once you get to the point of a rate lock, you should have made your decision on who you are going to work with - if not before.
My point is very simple, don't lock a rate unless you are ready to live with it. Last time I checked, that's what the word "LOCK" meant. If you don't want to lock, you bare the risk and float but don't try to have your cake and eat it too. When a lender burns you at closing on your lock, you know, the one that baited you in with the lowest rate, I hope you remember this post, because it's obvious you place no value on quality.
Anyone can quote a rate, the best loan officers close them ... on time.
"I do realize that one of these guys will end up wasting a bit of their time but if they can not offer the best product (rate and fees) out there than it was probably my mistake to pick them in the first place."
... is outrageous. How exactly can someone control the mortgage market? They offered you the best they had at the time and obviously good enough for you to lock with them, if rates fall, how on earth can you make a statement like that? No one forces you to lock a rate, you have the option to float until 3 days before closing if you wanted. If you chose this option, you would RISK losing the rate you were offered but could improve with the market, the obvious reason you didn't choose this option was the RISK. You wanted the protection of the lock while bearing none of the risk; it's easy to play the market on someone else's dime. A term in contract law and also in an ethical society is "consideration", and you have none regarding either. When I get clients like you I immediately cancel their lock and drop their loan if they are actively in a transaction elsewhere. I don't have time to commit my resources and expertise to someone who treats our industry as a used car lot. Scratch that, with less dignity or respect than a used car lot.
Some will say my post is harsh, but I make no apologies for my opinions and seek to educate borrowers because it's behavior like this that actually causes rates to increase for everyone. When lenders have to build into their rate sheets the cost of broken locks, then you will see these historically low rates disappear for everyone. I know we live in a Me, Me Me, society, but when is enough ... enough?
Good luck to you.
In all fairness to your original lender, you should contact them & let them know what you are doing - they gave you a great rate two weeks ago & they have put in the work for you - they might be able to work with you on this like Robin did with her clients.
There is considerable investment involved with locking a rate & I can see where if what you are thinking of doing is done by more & more borrowers, you can bet that in the future, you will see all banks requiring some type of non-refundable rate-lock fee that will make it painful for you to jump ship at the very end of the process. I am presuming this is not an FHA loan, because of how they are structured, & you would not be able accomplish this if it were.
Gregorio gave a very good passionate & detailed explanation. Another example in real estate would be for you to use two real estate agents to help you find a home & then once you decide to make an offer, you start asking them which one will give you the most rebate from their commissions to lower the price of the home or to help pay your closing costs.
What do you do for a living? How would this affect your income if someone did something like this to you?
On the other hand, if you came to me and told me you were double-apping me, I would tell you just to use the other person, no matter what. You may not understand why, but it is because of what Gregorio said. You are one client, and even though you can refer me others, my overall business is more important to me than 1 person.
It does not matter what they promise you if it doesn't close on time or in some cases doesn't close.
At the risk of being a bit repetitive, but something worth repeating. It is illegal for a real estate agent to accept anything of monetary value from a lender. The reason we as agents like to offer the names of lenders that we prefer to work with is because it is our business to know that the lenders we recommend with not only look out for the best interest of our mutual client but also that they can get the job done in an honest and timely manner.
So my recommendation is to do your homework upfront. All lenders are funded in essentially the same way so the terms/rates should not vary that much. If you see a big variance, you are likely on to a surprise down the road. Do your research, find yourself a lender you trust and talk with him/her about what you are learning. If you have "real" and "deliverable" competing product, they may well be able to meet it or get very close.
There are enough moving parts - and expenses for you - in ushering your transaction to close. Pick the best resources and product for you and then let them do their job to help you.
Unwavering Commitment to Service
As long as you know you that you risk losing the upfront fee paid to the lender that does not make the cut - you should come out ahead.
My favorite maxim is "You should be close enough to your mortgage banker to strangle them if necessary". Work with local bankers with recommendation from your Realtor. You will have that relationship to leverage in getting the best deal.
Let both bankers know up front you have made 2 applications. Full disclosure keeps everyone honest.
Serving Maryland, D.C and Northern Virginia
I wouldn't call your situation unethical at all; but what you described is not a "work with two lenders at the same time" scenario as was JB's from San Ramon. Berry, your case is one where you as the consumer got stuck in the middle of poor communication and decision-making abilities from your home building team...but, then again, I'm also not one to advocate using a builder's "in-house" lender (usually this is when the builder and the mortgage company have the same name, or the builder has some kind of ownership interest in the mortgage company), because any appearance of a better deal is typically a much worse deal overall. In your case, it was the "affiliation" that ironically caused the poor communication. But, this lender screwed up and it could have cost you by sticking with them. As biased as I might be against this builder's lender, I might still suggest you give your loan officer a brief window of opportunity to present you with a solution; but, overall, I think you are making a good, ethical decision with your change of loan officer.
Then I'm one of the few. I post my rates daily on my website at Correspondent Rates with YSP closest to Par with APR, 45 day lock & escrow waiver. When we lock the borrower sees the Lender's Confirmation with the Locked Rate & YSP earned. YSP is deducted from their closing costs. ... I also post my Settlement Costs under "See How We Do It." .... Being a Correspondent Lender we are not required to disclose YSP. I do!Upfront Mortgage Banker (UMB) Orange County (OC) http://www.umboc.com
Happy funding, Rudi
Just go with one lender you know and can trust. People don't work for free.
I would not advise it....because you will end up wating your time with no loan and have to wait to submit to other lenders. This is mortgage regulation at its finest, sorry.
Ask your realestate agent for a local referal hwo always does them right....
Hope this helps.
Look, mortgage bankers hate getting double app'd. And it really isn't in your favor anyway. Getting a loan shepherded through all the bull crap today is tough enough. You want to incentivize a mortgage banker to work your file.
And don't go comparing apples and oranges ... rates/points change every day. So don't go comparing what mortgage banker A quoted you on day 1 to what mortgage banker B quoted you on day 2 and make a decision on just what they quote.
Personally, if it's the house I really want and I felt based on my intereview, that Morgage Banker A was a better shepherd and could herd my loan through the what is often an exasperating underwriting process, I don't give a crap if I end up paying an 1/8th or even a 1/4 percent more.
Do you want the house or not? Now go get it!
I say use four, in the beginning,
Get pre qualified with each major bank, and one other you decide to choose.
Here is why.
When you go to get a home quite often the seller many times is a bank and wants you to be pre qualified with one of their sales people to get the ball rolling. This explains why each major bank , if you are at all looking at foreclosures.
You can choose any lender you want, however you have to keep within terms of your contract.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate License # 01312992
Most lenders are commission based. They don't get paid if the loan doesn't fund. Basically, what all the lenders are saying is that it is not right to waste someone's time by submitting an application and then playing the field. There is nothing wrong with shopping lenders, however... once you hear your options and are satisfied with the rate, you should commit to your lender.
I understand that a few bad apples in the business have ruined the reputation of all lenders. But if you have the opportunity to shop and your lender is capable of educating you on the loan programs, you don't have to be a victim.
Researching on the web is not giving you enough information to make an informed decision.
Here are a few obvious flaws in having two lenders at once:
1) There is a close of escrow date... most purchases take 30days.... if you start with one lender and switch to another... you will delay your close of escrow and possibly incur per diem fees
2) If you apply with one lender, and cancel and go with another lender.... if the second lender messes up... you may not be able to go back to the 1st lender because the loan was denied (assuming they'd take you back).
3) Different banks/investors have different guidelines. If you were approved with one bank, you may not be approved with the other. Not all lenders offer the same loan programs either.
4) Each lender will call the title company and agents for documentation and appraisal access.... it will be apparent that someone is not on the up and up
My suggestion.... shop lenders, go with the one you trust. Go with your gut. Be honest with your lender. Tell them your concerns so that they can help you alleviate them. Worse case scenario for a lender and you... you lock, the rates go down.... re-negotiate the fees or discuss the options. You may be able to go back to the seller and ask for concessions to cover the cost for the difference in rate. WIN WIN WIN
Your focus should be on finding the right house with the assistance of a great agent. Then do your shopping for a mortgage provider, and provide info requested on a timely and complete basis and unassuming your situation does not change markedly you should be fine.
The long and short of it is no, I dont' think it makes sense to work with two lenders in parallel. You'll have plenty to keep on track with just one.
Unwavering Commtiment to Service
And one realtor, too for that matter.
It is unanimous.
You have 20 answers (including mine) to your question of , "Is it smart to work with 2 different lenders side by side ..." not one of which is saying it is a smart thing to do. I think you have your answer, sir.
Let me turn it around on you would you like to do all your work at your job and then find out that you are not getting paid?? I would guess not?? Just a thought. You may not know but the Mortgage people I deal with are on 100% commission. They don't get paid till after they do all the work, go to closing, fund the loan. Its not like an hourly, or salery job.
I do realize that one of these guys will end up wasting a bit of their time but if they can not offer the best product (rate and fees) out there than it was probably my mistake to pick them in the first place.
Understanding the closing costs and other charges is also equally inmportant.
However the most important decision lies, yes lies, in deciding the hour of the lock. This is where the money lies!!!
There is nothing wrong with getting two opinions for your loan, you can choose the best interest rates and also if they are charging you any points. However you should choose the one that you feel more comfortable that is very resourceful and have great deal of knowledge. You can switch the lenders as long as escrow and all involved parties are notify, I am not quite sure if there is any penalties just like Dave Sutton suggested make sure that you ask all this questions to both lenders, the more you ask the better educated you will be.
Ruth E Feast
It is always good to do your homework but I would recommend doing it up front. You run a significant risk now with Fannie Mae's new loan quality initiative. On every loan a credit report will be pulled before funding. With multiple credit pulls it could affect your score and pricing.
My recommendation would be to find a lender you can trust and feel comfortable working with and once the terms are agreed upon close the deal. I'm sure all parties in the transaction will appreciate it.
Please feel free to email me if you have any questions on the process.
Best of luck,
Banks are getting really picky about lots of things, so even though I am not aware of any penalty for not proceeding with a loan after you have locked a rate, you would be smart to ask the question and read the fine pint.