For a conventional loan, rather work with one lender or multiple lenders at the same time?

Question

Hello BP, I am looking for my first mortgage and I am wondering if it is better to work with one lender, or with different ones at the same time and use the one who gives me the best deal?

What are the advantages and disadvantages? What is the effect on my credit score? Thanks a lot! Anja

Joseph Zanazan · Answer

Lending as a whole has evolved quite a bit over the past decade in a sense that its become a lot more consumer friendly with the guidelines and disclosure requirements that have been set forth for credit providers to adhere to. As a consumer, you're not only limited to a broker or S&L institutions that are federally regulated. Due to the financial crisis of 2008, brokers that were involved in unscrupulous lending practices and the major depository banks that over leveraged their lending powers were specifically ordered to cease or correct their lending practices. Think of the meltdown as a rough storm that came and washed away all the sins of those who malpractice and called for regulatory guidelines to be put in place which in my opinion were long overdue. The sun did rise again after the storm and what ensued was a more accountable and honest attempt at trying to restore credit lending practices as a whole. A new form of lending institution has sprouted from the ground which has promised and delivered a much cheaper and safer method of delivering residential mortgage products. CONSUMER DIRECT lending time and time again has proven to be the most competitive when it comes to turn times and pricing. Its proven to be more cost effective than dealing with a broker who normally needs to charge a fee to get a loan done, and has also proven to be way more cost effective comparably to the depository institutions we've all known to love throughout the years who usually have their attention and efforts spread over a broad range of financial services. CONSUMER DIRECT lenders are the best way for you to go because they usually don't function based off volume driven guidelines. What that means is it doesn't make a difference to your pocket whether your loan is for $200,000 or $400,000. Most consumer direct lenders charge a standardized origination fee that consists of processing and underwriting which normally should be in the range of $1200-$1800 + your standard 3rd party charges of title and escrow which again should be around $1500 for a conforming loan. Your total cost to get a 1-4 unit residential loan done shouldn't exceed $4000-$4500.

This platform of consumer lending puts the lender in a position to make a little bit on a lot of loans as opposed to the previous practices which were making a lot on a little bit of loans. Also, consumer direct lenders are not federally regulated, they're regulated by the state. Federal jurisdiction is so broad and casts a large shade for these major banks to rest under, as opposed to state legislation which is a lot more specific and strict. The government has made it a law for all mortgage professionals that work for a consumer direct lender to be licensed by the NMLS. The NMLS has established a method of tracking and tracing  accountability of every single lending institution and the professionals that they employ. The NMLS requires bankers to apply for and complete lending & ethics courses followed by an exam that tests their knowledge of the duties they will be fulfilling. This means that as a consumer you should be able to verify and research the credibility of the professional that is assisting you with the loan process. Remember, not all bankers are created equal nor  are they all incentivized the same way, This means that some are more knowledgeable than others with certain types of loans and some will undoubtedly work harder than others.

As opposed to focusing on which bank will "give you the best deal" or "give you the best rate", try to do some research about the individual and the institution who is assisting you. I would recommend you apply your time and energy to selecting the correct banker and bank as opposed to the one that will get you the "best loan". Most lenders have a rate match policy anyway so they don't lose potential clientele because a competitor offered an interest rate thats an 8th cheaper. Multiple inquiries as previously mentioned won't do you any favors in this type of situation either. The loan process is a very commitment driven process, meaning both parties need to always be on the same page in order to protect the success and integrity of the closing. Remember you're expecting the banker to be transparent and give you the time and energy you deserve to get the loan done, they need the same from you. If a banker isn't licensed, stay away from them. Verify their license information and make sure they have nothing derogatory about their previous practices. All this is public records for you to verify as the consumer. Here is the official NMLS link for you to do your homework.

http://www.nmlsconsumeraccess.org

Remember, don't play the rate game. The rates are all pretty much going to be the same at the end of the day. Save your energy and time, be shrewd about it and you can't lose. Im here to answer any further questions you might have. Im always here to assist with any mortgage related topics.

Anja Brey · Answer

@Joseph Zanazan @Jeff  S. Thank you for your advise! Joseph, I just used the web page you shared and found the lender I am currently working with. She is licensed and has no disciplinary actions listed. Anja

Jeff S. · Answer

You want to do research and choose one and make your application. If you apply at more than one they will figure it and not appreciate your wasting their time. Besides that it dings your credit score each time they run it and especially if done multiple times.