Backup Lenders During Escrow? Concerned about underwriting...

[Adrienne Anselmo]

Hello, first post here and first time buying a home. I've been reading through the forum for a couple of weeks and I've learned so much here... amazed by how intelligent and insightful these discussions are.  I hope maybe  someone here can analyze my scenario and help me make the right move.

I am starting to suspect that my lender's underwriter will not approve me for a loan. I only have 28 days left before closing. I would like to start contacting other lenders right now, as a backup measure.

My thought is that it would be wise to have more than one lender looking over my financial profile and subjecting it to the underwriting process, so that even if one were to fall apart, at least I will have a chance to make the closing date on time with another.

Right now I am pre-approved for a conventional 30-yr fixed. The lender has already done an appraisal and I am in the underwriting process. Underwriting is proving to be more rigorous than I imagined, owing to the fact that I am a business owner. So I'd like to apply for a business statement loan with another lender. 

Question: can I submit my documents to more than one lender now that I am already in escrow? Would this entail multiple lenders contacting the escrow company or agents and doing multiple appraisals? Will it cause significant problems?

[Geordy Rostad]

There's a few things to consider here.

First off, for conventional lending, most of the lenders are using the same guidelines so if you are having trouble qualifying with one, that same factor could be an issue with another lender.

Second, you'll want to read the financing contingency in your contract to make sure that you can switch lenders midstream without defaulting on the contract. I don't know where you live so I can't claim any familiarity with the forms you may have signed.

Third, If you let a new lender pull your credit again, you could potentially lower your credit score which could cause you yet another problem qualifying.

Fourth, the appraisal you have paid for will not be transferrable to a new loan/bank. You'd have to shell out more money for that at the other institution.

Are you using a mortgage broker or are you dealing directly with a bank? When dealing with a bank, it can seem disjointed and can honestly seem like they are just sitting there looking for excuses to not loan you the money. When you deal with a mortgage broker, they act as your advocate and help you round up the paper work and if they see something going sideways with one lender, they can usually slot you in with another one really quick without skipping a beat. 

I'm not advocating that a broker is the only/best way but in some cases with more difficult qualifications for instance, they can be a huge asset.

Have you spoke with your realtor? What do they think? Make sure you have an open communication with them about this since they will probably be able to provide you good perspective on the situation.