Applying to Two Mortgage Lenders at the Same Time?
Hi, would people recommend to apply with two mortgage lenders at the same time? I searched online for this topic and found the opinions split 50-50. On the pros side, I can compare rates and costs until the moment I need to lock the rate. On the cons side, I need to pay twice the appraisal fee, and might hurt my credit score. What do people with real estate in this area recommend?
Thanks,
Darren
Hi Darren, you can compare rates and costs without having them pull your credit or paying for appraisal fees. It makes sense to compare lenders, but don't have each of them pulling your credit. And don't pay fees while simply comparing. Hope that helps!
For loans based on my credit, I'm always tracking my score, so I have it at hand; otherwise I always have my financials - REO schedule, P&L or just gross rents updated - and I can answer any other questions on demand, so that's enough to get a firm loan comittment contingent on the appraisal, and I always know my ARV; one appraisal typically will be in the same neighborhood as another (but I have been unpleasantly surprised. It can happen) so no need to pull credit or pay for ANY appraisals in order to get a firm loan comittment. Anyway, this has worked for me to get 3-4 offers. I will say I have also had the experience of a lender bait and switching on me after I committed to move forward and even paid for an appraisal (the value of which came back as expected). He went from 75% to 70% and jacked up the rate nearly a point. Life is full of surprises. Some pleasant, some not so much.
Darren,
You should be able to compare both companies without running your credit. I have never run someone's credit score without showing them a quote stating the costs of everything. Usually, I plug in numbers, then send the quote over to the potential borrower, and if they like it, they complete an application and then we run credit and you pay for an appraisal.
It sounds like you are having your credit run first?
If only there was some profession that could collect your info once, pitch the scenario to several dozen lenders all at once for their rates, fees, turntimes, service levels, etc, and if only people in that profession got preferred wholesale pricing that beats what retail consumers calling directly get from those exact same banks. :P
Note that bankers aren't brokers by definition, post-meltdown when the entire mortgage world was restructured and brokers temporarily dropped from ~30% to 0.1% market share, most consumers and half of the Realtors out there don't know the difference. Quick litmus test that's 90% accurate, just ask "hey what do you think of United Wholesale Mortgage?" - a broker will have an opinion, a banker will be like "who?" Another 90% accurate test, "Are you W2 or 1099?" - nearly all brokers are 1099, just like Realtors (W2s come with 401ks and subsidized health insurance, why would a bank give someone a W2 and let them broker loans elsewhere to get the client a better rate? You give them the W2 and the 401k match and all that in exchange for them being a captive vendor).
Hi David (and thanks to others for their replies), in your reply you mentioned "so no need to pull credit or pay for ANY appraisals in order to get a firm loan comittment". I'm not sure how this can be done, unless you are talking about a pre-qual letter or pre-approval letter. But I don't think there is a way to lock into any interest rate without going through the whole appraisal/application. Say if the closing is expected to be on 1/15/2020, can I ask the lender to lock into a 60-day rate now? @David de Luna
You lock when you've made your lender/broker selection. The lock will be the rate he gave you on his term sheet/loan comittment. Length and terms of lock you would have gotten clear on in order to decide. Not all lenders give a 60 day lock. Caveat emptor.
@Darren Chang Yes, any decent lender or broker can lock in your rate up-front prior to ordering an appraisal and going through underwriting. I wouldn't recommend working with anyone who can't. An application will always require a credit check though, just to clarify.
To answer your original question - there's no need to go through the entire loan process with 2 different lenders. Just compare rates and fees up front and decide who you want to work with, and make sure they can lock you in right away. It's unethical to drag along 2 lenders that both think they have your business, unless you're very clear about what you're doing. But again, there's not much point in doing that.
@David de Luna Going through the bait and switch now. Rate has gone from 4.875 to 5.25. Or $75 a month additional interest. Should have locked it.
@Darren Chang I shop 2-3 regularly, and tell them up front. They're all friends anyway, so they're gonna talk to each other and they'll find out. On one of the deals they kept getting better and better with rates and fees - even to the point of putting the squeeze on the title company.
Which brings me to another point, shop the title company, use a spreadsheet of their fees. Surprisingly, fees vary wildly, and I think there was a difference of $400 or $500 on the last 2 I compared. I prefer that money in my pocket. A lot of people buying just go with whoever the realtor 'refers' them to. I'm sure there's pockets getting padded in the referral process in some way, shape or form.