Is it too late to switch mortgage lenders?

Question

I have been under contract on a property for a while now (closing was pushed back in order to allow one unit's lease to expire so as to allow me to owner occupy), and I have been in negotiations with a local lender. I haven't locked a rate with them, and recently I became aware of a much better rate available with a different lender. I have signed some disclosure docs with the current lender, but to the best of my knowledge, I haven't signed anything binding. However, we have met several times in person and were very close to locking everything in prior to closing. I also want to be professional and not burn any bridges, but this new rate is too good to pass up, especially for an agreement as long term as a 30 year note.

Based on what I have provided, is it still fair to switch lenders? Is there anything binding I could have signed besides the actual document that spells out the loan terms, closing costs, etc (which I haven't signed)?

Based on what I have provided, is it still fair to switch lenders?  Is there anything binding I could have signed besides the actual document that spells out the loan terms, closing costs, etc (which I haven't signed)?

Chris Collins · Answer

Matt,

Your contract may provide that you have to give notice to the seller, or it may not.  If it's silent and you can still make the closing date there' likely no problem. ***

I'm a REALTOR in Kansas City, our contract form provides that the buyer must notify the seller and that the change can't increase fees to seller or cause delay in closing.

***All of us that give you advice on here have great intentions....but only you have access to your contract.  READ IF CAREFULLY.  Those terms will control.   If  you have ANY QUESTIONS you should seek legal advice. None of us (unless we are an attorney licensed in your state) are qualified to give you legal advice. Further good advice can only be given after review of your contract with the seller.

Generally there is a way to get it done.  It may be very simple or maybe not...depending on your contract.

Russell Brazil · Answer

Lots of people get enticed to switch based on a quoted rate the lender can not actually produce. I see it happen all the time. They quote a product that the individual or borrower is not eligible for, then it becomes to late to switch again.

You also might have a fee to break the rate lock.

Harjeet Bhatti · Answer

@Matt Austin  You have a right to switch the lender any time but talk to current lender you may have option for same rate.

Frank Wong · Answer

How much time do you have?  Be transparent about this and let all the parties know.  You sure you willing to risk losing the deal for a better rate?  Man, I see this all the time people trying to save on the rate while in the middle of the contract. Not good.   It better not be for .25%  change LOL.

Matthew John · Answer

@Matt Austin It depends how far from closing you are & how quickly the seller wants out.

I switched from Huntington to Chase 2 weeks before the closing date because Huntington decided to change the terms on me last minute.

The seller told me he wasn't willing to push back the date and if I didn't close in time he would put it back on the market. I made sure Chase was aware of this and got them everything ASAP, we managed to close with Chase in 2 weeks!

I wouldn't worry about burning a bridge...there's a million different lenders out there. Go with the best one! You're the one going to be stuck with the loan for 30yrs, not them!

Matt Austin · Answer

@Chris Collins

Thanks Chris, that’s what I love about Bigger Pockets. I get to leverage the knowledge of pros like you! I will certainly heed your advice.

I have talked it over with my agent and he assures me that there is nothing I need to disclose to the seller.

Matt Austin · Answer

@Matt Groth we just crossed the 60 days from closing mark and we were able to lock the rate for 60 days

Matt Groth · Answer

@Matt Austin if you have that long, it is worth the switch for sure. Will they lock the rate that far in the advance?

Matt Austin · Answer

@Matt Groth one of the big reasons I am even considering this is that I have MONTHS until closing, so lots of time to get things done, and the new lender knows my timeline and seems committed to a speedy underwriting. For those asking, the difference in rates is 0.75%, which was enticing enough for me to take the leap.

Matt Groth · Answer

@Matt Austin I sold my primary last spring, and the buyer changed lenders. I knew them pretty well, so I agreed. If I had it to do over again, I would have added some to the sale price. They got a better rate, but it cost me another month of holding costs. Be aware, it could cost you the deal. Are you prepared for that?

Is it too late to switch mortgage lenders?

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