Buying property is stressful. Both buyer and seller want the process to go as smoothly as possible, as does the chosen mortgage lender. However, even when everything is planned, changes may occur—sometimes even at the last minute when a closing is imminent. The need to switch lenders may occur for several reasons, but the ease of the switch will be dependent on both the type of loan and, crucially, how far into the purchase the switch needs to be made. Rates continue to be good, but sometimes the practices of a lender are too predatory. Where the appraisal has already been completed a switch is definitely possible, but some institutions simply won’t accept it, whilst others will demand that a borrower uses a specific loan product.
Switching may appear to be a fairly simple process, but it depends on the attitude and knowledge of those involved. If employees know their business and are familiar with procedure, it may indeed be quick and easy. However, when they don’t, it becomes very difficult. Some lenders have specific guidelines and formats they insist must be observed, and other institutions may not be aware of these, or willing to comply with them. Unsurprisingly, this causes delays.
Often after a buyer has paid an appraisal fee to an institution they feel trapped, and think that if they switch lenders they will then need to pay for another appraisal. This isn’t the case; whilst this is not a quick process, where there is cooperation between lenders, an appraisal payment should absolutely not prevent a buyer from switching lenders.
There are problems apart from a lack of cooperation. When switching the time line will be disrupted, causing inconvenience to both buyer and seller. Furthermore, in the purchase contract, the buyer has to be truthful, specifically in the pre-approval letter. When this changes, other paperwork must be amended. Buyers often forget that acceptance of the buyer’s offer may be dependent on the firmness of his loan situation. Failure to take this seriously could be a mistake.
To put it simply, a buyer isn’t obligated to use the original lender and may certainly switch if he considers it beneficial. After all, no one can be blamed for trying to get the best deal, especially on a purchase as large and significant as property. However, a buyer must be aware of the downsides. Credit rating may be affected, if the switch takes place too late in the transaction it can cause delays, and sometimes a sale may even fall through. From the seller’s perspective, a switching buyer isn’t generally a positive because he has been depending upon the seller assurances and the contract time line, which is now being disrupted. It isn’t necessarily the money that is the issue for the seller; nevertheless he may choose to keep a deposit and walk away from the deal. Ultimately, it is best for both parties if the buyer switches lenders before pre-approval. Switching after this step can cause too many problems for all parties concerned.