How to Switch Mortgage Lender without Refinancing – The Details

How to Switch Mortgage Lender without Refinancing

Changing a mortgage lender is a very difficult task and if you are a USA resident then it is impossible to change a mortgage lender without refinancing it. As a borrower, you are secured under consumer protection laws and according to this law, you can walk away from any loan before the closing deal. However, if the mortgage is issued then without refinancing you won’t be able to transfer the mortgage to a different lender.

How to Change a Mortgage Company

The process of changing a mortgage company is quite similar to applying for a new mortgage. If you want to change a mortgage lender then you must get your mortgage pre-approved by your new lender. It is wiser to get a pre-approval before you change the lender. If you have a lender in mind then you should collect all documents and submit an application. If you decide to change the lender because of the lower interest rate then you should keep in mind that the offered interest rate can change based on a credit check and an appraisal.

How to Switch Mortgage Lender without Refinancing

On the other hand, if you don’t have a lender in mind then you should shop around for a new lender and try to get preapproval from multiple lenders. This way you will be able to compare the offers from various lenders and find the best mortgage for your house. It might take a few days to find a new lender so, you should look for a new lender right away if your deadline is approaching quickly. Robert Heck, vice president of the mortgage at digital mortgage marketplace Morty says –

“Homebuyers should arm themselves with as much information as they can; you can also save yourself unnecessary stress and money by doing the groundwork upfront and shopping around for different lenders and rates ahead of closing. As online platforms continue to reinvent real estate transactions, there are many ways to compare mortgage options so you can make sure you’re getting the most competitive deal.”

Once you find a suitable lender for your mortgage then you should try to lock the interest rate and then proceed with the underwriting process. But after searching, if you don’t find a better lender that can offer a good enough deal to make the switch worth it, then you should stick to your current lender. However, if you have decided to change the lender then you should inform your real estate agent and the seller so that they can create a new timeline to close the loan.

Reasons to Change a Lender

There are many reasons you might want to change your mortgage lender. The two most common reasons are a better home loan offer and a bad customer service experience from the old mortgage lender. In most cases, if the interest rate changes significantly then many borrowers want to change their current lender and go for a new mortgage.

How to Switch Mortgage Lender without Refinancing
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But, in this type of situation, you should consider all the loan costs that are disclosed in the APR. Sometimes, borrowers are not satisfied with the service provided by the lenders. Poor customer service is another key reason many borrowers want to change their existing lenders. Other important reasons are –

  • There is a delay in the closing of the mortgage and your deadline is approaching
  • Unexpected changes to loan fees, terms, or conditions
  • The constant change of the real estate agent
  • A new offer from a lender with a lower interest rate and mortgage cost
  • The requirements of the lender exceed the standard qualification guidelines for the loan program, etc.  

What to Consider Before Switching to a New Mortgage Company?

Well, you might have some good reasons to shift to a new mortgage company but before switching to a new lender, there are a few important things you should consider. The below information will help you decide whether it will be a good decision to change your current lender and move to a new company. Let’s check them out!

1. Closing Delays

While considering changing your current lender, you should consider the closing delays. Usually, it takes 30 to 45 days to close on a mortgage. When you want to change your lender, you have to go through the whole process again. Moreover, if you close your mortgage deal before the loan term it can affect your credit report. Moreover, if you cross the deadline then you have to pay a daily fee to the seller as compensation for the delay. Therefore, before switching to a lender you should contact the lender and check whether the lender would be able to meet your deadline for closing.

2. New Credit Check

Switching to a new lender means you have to go through the mortgage process from the beginning and it also means that your credit report will be checked again. You might already know that lenders usually do a hard pull for a mortgage application and this type of credit inquiry has a negative impact on your credit report. Moreover, if your credit score is decreased because of your current loan then it can affect your new mortgage application. Therefore, you should think very carefully before switching to a new mortgage company.

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3. Higher Interest Rate

Many people switch their current lender to get a lower interest rate but in most cases, the interest rate of the new mortgage becomes higher than the older one. This is because the lender might offer you a lower interest rate but when you submit an application and the lender analysis your application and credit report they might increase the interest rate based on the valuation of your application. This is a very important disadvantage of switching a mortgage lenders.

4. Repeated Costs

When you are planning to switch mortgage lenders, you have to consider all the repeated costs of the whole process. Depending on how far your previous mortgage was progressed, you might have to pay some of the costs again! In most cases, you can’t transfer appraisals, but there is an exception for a Federal Housing Administration loan. Ray Rodriguez, regional mortgage sales manager for New York at TD Bank says –

“If a new appraisal is needed, there is a risk that the value of the home could come back lower than the original appraisal; which could negatively impact pricing, product, and other factors.”

Moreover, you have to pay again for the new credit check and the new lender can charge higher closing costs compare to your current lender. So, you should carefully consider all the repeated costs that you have to pay when you choose a new lender.

FAQs about How to Switch Mortgage Lender without Refinancing

Can You Change Lenders After Closing?

If you are living in the USA, then the only way you can change a lender after closing is to refinance your mortgage. Without refinancing, there is no way you can change your current lender.

When is it too late to change mortgage lenders?

There is no good or bad time to change your lender. If you think that you need to change your lender and the reason is valid and logical then you can change your lender any time you want. However, if your mortgage deal is completed and the service is started then you have to refinance your mortgage to change the lender. If you are only prequalified then you can easily change the lender and you don’t have to refinance the mortgage.

Can you switch lenders during underwriting?

Yes, you can change mortgage lenders during underwriting, and nowadays it has become a very common scenario. You don’t have to worry about refinancing the mortgage if you decide to change the lender during underwriting. However, switching lenders during underwriting will delay the closing process and there will be some repeated costs.

Can my mortgage be sold more than once?

Yes, your mortgage can be sold more than once. The current loan holder can sell it to another company!

Can I walk away from refinancing?

Yes, you can walk away from refinancing but you will only have three business days to do so once the deal is closed. You should keep in mind that the above rule is only valid if you are refinancing your mortgage. But, if you are buying a home with a mortgage, then there is no way you can walk away once the deal is closed.


Last Updated on August 7, 2022 by Ana S. Sutterfield

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