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.
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
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.
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.
Coldwell Banker Premier
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.
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.
Grace Morioka, SRES, e-Pro
Area Pro Realty
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.
But to be on the safe side....be 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!!