Shopping for a mortgage lender is an essential step in the home-buying process. You want to ensure you're getting the best rate, the right terms, and working with someone you trust. It’s highly recommended to compare lenders to make an informed decision. However, once you start seriously shopping for a home, you should have already selected the lender you're going to work with for the remainder of the process.
Here’s why:
1. Avoid Delays
Switching lenders mid-process can cause significant delays. When you're in the middle of making offers or finalizing a home purchase, every day counts. Each lender has its own set of procedures, underwriting requirements, and timelines, so switching can slow everything down, potentially leading to missed deadlines or even losing the home you’ve been eyeing.
2. Incurred Fees and Potential Compensation
Changing lenders mid-transaction could also lead to additional costs. Many states, including Florida, have agreements like the Florida Mortgage Brokerage Agreement that allow lenders to collect the agreed-upon compensation if a loan commitment with conditions has been provided and met. The same applies to realtors under the Buyer’s Agent Compensation Agreement. If you switch lenders or agents after these agreements have been fulfilled, you may still be responsible for the agreed-upon compensation, even if you don’t proceed with the same lender or realtor.
3. Certain Requirements Are Non-Transferable
While some services, like an appraisal, can often be transferred to a new lender, other items cannot. For example, a title search, which is typically ordered by the title company, cannot be transferred. If you switch lenders mid-process, you may be required to re-order these services, resulting in additional costs and delays.
4. Be Wary of Too-Good-to-Be-True Promises
When shopping for lenders, be cautious of promises of lower rates or faster closings just to earn your business. Some lenders may use aggressive tactics to draw you in, but those offers may not hold up under closer scrutiny. It’s essential to ask for all the details in writing, including rate locks, closing timelines, and conditions attached to those promises. Often, switching lenders based on unrealistic promises can backfire, resulting in missed deadlines, increased stress, or even higher costs in the long run. Make sure you're working with a lender who can deliver on their commitments with transparency and integrity.
5. New Rules with Realtors
Under new rules, buyers are now required to sign an agreement with their realtor before viewing homes. This agreement outlines the expectations and compensation for both parties, and just like with lenders, it ensures that the realtor will be compensated according to the terms agreed upon. If you switch lenders or agents mid-process, you could still be responsible for paying that compensation, even if you don’t continue to work with them.
6. Courtesy and Professionalism
It’s an expected courtesy to the professionals handling your transaction—whether it’s your lender, realtor, or title company—not to disrupt the process by switching teams after an agreement is in place. The home buying process requires significant time and effort from multiple parties, and it’s important to honor the commitments you’ve made to ensure everything runs smoothly. Shopping around is smart, but once you’re under contract or actively shopping for homes, it’s essential to stick with the lender and team you’ve chosen.
7. Changing Lenders Can Be More Expensive
Beyond agreed-upon compensation, switching lenders mid-process can lead to increased costs. You may lose any rate lock you had in place with your previous lender, and a new lender may not offer the same favorable terms. This could result in higher interest rates or less favorable loan conditions, ultimately making your home purchase more expensive.
The Bottom Line: Choose Wisely, Then Stay Committed
The takeaway is simple—while it’s important to shop around for a lender, once you’ve made your decision, stay committed. Finalizing your mortgage financing before you start shopping for homes helps avoid unnecessary stress, costs, and complications.
By making thoughtful, informed decisions from the start, you’ll ensure a smoother, more efficient home-buying experience for everyone involved.
If you're ready to get started or need any guidance on picking the right lender, feel free to reach out! We're here to help make this process as seamless as possible.
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