What Are The Disadvantages Of Changing Mortgage Lenders?
There are always some inherent risks in any decision you make in the home buying process, and changing lenders is no different.
Lender Changes May Lead To A Longer Loan Timeline
The only real risk when changing lenders after your offer has been accepted is that it might make it difficult to close on time. If the sellers want to close quickly, any delay might jeopardize the sale, especially if the desire to switch comes later in the process.
A New Lender Means A New Credit Check
Lenders often use a hard inquiry to check your credit, which may lower your credit score temporarily. Switching to another lender will mean another hard inquiry, which might lower your credit score and increase the new mortgage cost.
You Might Need To Get A New Appraisal
If the first lender you chose to work with has already conducted the appraisal, but the new lender doesn’t work with the appraiser used, you may need to pay for a whole new appraisal. A new appraisal will be an additional cost to you and is worth considering before choosing to work with a new lender.
You May Pay Higher Closing Costs
At first glance, a lower interest rate can make it seem like switching to a new lender will be more cost-effective. However, a new lender may charge higher or additional fees compared to your original lender, completely offsetting the benefits of the lower interest rate.
You May Need To Pay The Seller A Per Diem
If changing lenders pushes your loan closing date out, you must negotiate this change with the seller. Some sellers may ask for compensation for this delay, often in the form of a per diem charge.
A per diem charge is a daily fee paid to the seller until the loan is finally closed, leading to another recurring fee on top of any other fees acquired from switching mortgage lenders. If you know that switching lenders will incur per diem charges,calculating the total per diem interestwill be important to determine if it’s worth it.
