Financing in 94086>Question Details

Mgage, Home Buyer in 94086

We got into contract a couple of days ago. Lender A has done an appraisal for us & we are working with them.

Asked by Mgage, 94086 Mon May 18, 2009

However, we are now getting much better rates with Lender B.
We want to start the loan process with Lender B as well.

After both Lender A & Lender B send their loan documents into escrow, we decide to close with Lender B.

Do we owe any money to Lender A (apart from the appraisal that we have already paid for)?

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Help the community by answering this question:


Rates can change day to day, so if you are shopping be sure to let each lender know and be sure you are comparing comparable rates, terms and the day of quote (think the stock market, it changes daily and so do rates).

If you wrote a contract and submitted that contract with a pre-approval there may be language or implied expectation that you are using Lender A. If you change mid stream and don't let the other side know there may be issues. If Lender B doesn't perform and your loan contingency is based on Lender A are you in breach of contract? Talk with your trusted agent. People can promise the world but if they don't deliver it means nothing.

To answer your original question, I'm not a lender, I believe you will have to pay for the appraisal, possibly application fee and credit report. After all these service providers are not non-profit organizations and I suggest buyers to be respectful of the time these service providers have invested in them.
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0 votes Thank Flag Link Thu Jun 25, 2009
Rates are a criteria - however the million dollar question is what are the other charges associated with the loans in question. If one lender gives you 5% without points and the other lender gives you 4.875% with 1 point, which rate looks better? (For calculation purposes I plan to stay in the house for only 5 years) Do the math!!!
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0 votes Thank Flag Link Wed May 20, 2009
Mgage, major banks use non-licensed W2 employees, who may be very competent, but nonetheless focus on the offerings of their employer. To Bill's"quality of service" point, and your question, "Isn't rate the only criteria then?" please review the following:

Best, Steve
0 votes Thank Flag Link Tue May 19, 2009
What about when both our major banks & the service is comparable. Isn't rate the only criteria then?
Do the big banks (Wells Fargo, Bank of America) make you sign documents that require you to pay up if you go through the whole process but don't close with them
0 votes Thank Flag Link Tue May 19, 2009
Your question implies that your major motivation is to get the lowest rate. You make no mention of the quality of the service. If this is true then you do not know enough about the mortgage business to be out there on your own.
Would you rather have the lowest rate on the wrong loan, or the best available rate on the correct loan for you specifically, at this point in your life, and with due regard to both short and long tem plans.
0 votes Thank Flag Link Tue May 19, 2009
A couple of days ago means you have not gotten very far. It's pretty clear lender B knows about lender A but not vice-versa.

You will be able to decide who to go with long before you walk into a signoff.

Lender A deserves you pointing out the fact that you have been looking into rates and an application with Lender B. They may very well be quoting higher rates to be careful and conservative. If they deliver lower rates for your lock or when docs are drawn, they're heroes. When lender B delivers higher rates when you lock or get docs in title, they are greedy bait and switch hooligans. Happens all the time.

You have to be careful about what you are assuming. Be honest with each lender. The problem(s) you are worrying about will resolve themselves as you proceed. And probably much more easily than you are currently worrying about.

You will owe for each appraisal and any application fees you pay up front will probably be non-refundable.

Mark Burns
Coldwell Banker Premier
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0 votes Thank Flag Link Tue May 19, 2009
One way to handle this is simply be up front with both lenders about wanting the best rate. Let them compete for your business.

The other issue is that there is a big difference between starting paperwork for a loan and the loan actually being funded and closing escrow. Not all lenders are created equal. It might cost a little more, but having a back up lender may not be a bad idea. It may be that you can have the lenders compete, then the losing lender becomes the back up lender if the first one fails to perform.
0 votes Thank Flag Link Tue May 19, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
Hello Mgage and thanks for your question.

Much like a marriage, it's best to discontinue one (loan) relationship before starting another. While this practice may have been accepted in the past when lenders were raining down upon buyers with money, it is now likely to cause one or both of your lenders to choose not to offer you a loan.

If Lender A has completed the appraisal, then if you discontinue now, you will in all likelihood be obligated to repay them only for the appraisal cost. However, if you allow the transaction to continue through loan documents--as you suggest--you will (as Steve pointed out below) most likely be responsible for the costs associated with the administrative time in reviewing and drawing documents. To determine exactly how much you might owe, talk with the loan broker or review your documents regarding cancellation of the loan.

I might also add that when Lender B pulls your credit report, he or she will most likely see the credit inquiry of Lender A. At that point, you may have disclose that you are still working with Lender A--if you have not discontinued the relationship--and that is most likely going to cause Lender B to choose not to submit a second loan on your behalf.

To ensure that you don't lose a loan to purchase your new home, talk with your current loan representative and let him/her know that you found better rates at another lender and may wish to discontinue the application process with him or her. If you have not yet locked a rate on the loan, you may be able to negotiate a small adjustment in your current rates as an incentive to stay with your current lender. Again, you will not know the costs or the possible savings until you speak with your current mortgage or lending represemtative.

Good luck!!

Grace Morioka, SRES, e-Pro
Area Pro Realty
Sunnyvale, CA
0 votes Thank Flag Link Tue May 19, 2009
If you are "in contract" you have a real estate agent that signed your offer with you. Have them work this issue for you as part of earning their commission.
0 votes Thank Flag Link Tue May 19, 2009
Hi Mgage,

You should review any paperwork that you signed to determine whether you owe any money to Lender A. Some lenders do obligate clients to a reimbursement policy; others see this as a cost of doing business. Your answer will be contained in the text of any documents you endorsed. Bottom line: if you did not agree to it in writing, you are not obligated to pay.

Best, Steve
0 votes Thank Flag Link Mon May 18, 2009
Most likely not. Lenders only earn their fees when a loan closes, not before. What you are suggestion actually happens quite often when borrowers find better rates elsewhere. You would never be charged if your loan was denied mid-stream so you should not feel any obligation to pay any fees if you never closed.
0 votes Thank Flag Link Mon May 18, 2009
Every lender is may owe for the appraisal, credit report and document preparation or processing fees.
But to be on the safe upfront with your loan agent and let them know you are going with loan B and they will let you know what fees to expect.
And...congratulations on being a home owner!!
0 votes Thank Flag Link Mon May 18, 2009
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