Let's say you are closing on a place in approximately 45 days. Obviously, various lenders offer various rate lock provisions for various lengths of time. Some will charge an explicit fee, some will bake the cost of a rate lock into the mortgage rate itself, and some (supposedly?) won't charge anything at all. This all is dependent on many things, including how far out you lock the rate. Practices... [more]
Let's say you are closing on a place in approximately 45 days. Obviously, various lenders offer various rate lock provisions for various lengths of time. Some will charge an explicit fee, some will bake the cost of a rate lock into the mortgage rate itself, and some (supposedly?) won't charge anything at all. This all is dependent on many things, including how far out you lock the rate. Practices vary greatly.
Also of note, some lenders will let you "float down" the rate if rates are lower at the time you close. Some won't. Again, this depends. In my limited experience, most "say" they won't but typically will do so.
So my question is, what downside is there to getting multiple rate locks from multiple lenders? For example, if it rates are more advantageous, why would I not get a 60 day rate lock now from Bank of America, eventually a 30 day lock from Well Fargo, then a 14 day lock from Chase, and no lock from TD Bank? Then when it's time to finance, I just take whichever rate/fee combination is to my best advantage?
Wouldn't this allow me to participate in the joy of rate locks at multiple points in time, with no cost to me because I don't pay anything if I don't take out the mortgage with them? I only see upside here, other than the hassle of working with multiple banks. Am I missing something?
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Response by 300_mercer
about 9 years ago
Posts: 10567
Member since: Feb 2007
It is a lot work to get the loan approved from each of the banks (incremental 20 hours for each at least). They may charge you for appraisal fee. In addition, it may impact your credit report to get a loan approved from many different banks. I would not comment on the ethics of doing this.
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Response by Aaron2
about 9 years ago
Posts: 1697
Member since: Mar 2012
What is the ethical problem of shopping around for the rate/lock/timeframe that is most advantageous to you? Lenders compete for your business, and since you paid any entry fee (application fee, appraisal, etc.) but showed up for the party alone, you can go home with any one you choose, after seeing what sort of dancer they are.
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Response by 300_mercer
about 9 years ago
Posts: 10567
Member since: Feb 2007
Aaron, The application fees do not cover the costs. Shopping around is just getting quotes rather than locks which is just fine. Wasted extra cost crested by locking at multiple places increase the average cost of rate lock built into the mortgage rates for the borrowers who shop and only lock at one place.
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Response by front_porch
about 9 years ago
Posts: 5316
Member since: Mar 2008
I don't sell townhouses, but that might work if you were purchasing a townhouse.
However, if you are purchasing in a co-op or condo building, the building's board will require a formal loan commitment as part of your application. Getting to the commitment stage, as 300 Mercer notes, is not particularly cheap ( I just saw a mortgage bank charge a client $1,000 for appraisal plus lien search).
You could, in theory, have board approval on one loan commitment and then switch lenders, but in addition to the two sets of fees you'd be paying to get to two commitment letters, you'd have to have the managing agent approve the replacement lender, and the building's board would also have to redo the loan recognition agreements that they'd set up with the first lender. (Meanwhile, you, as buyer, would be on the hook for the attorrney's fees on both sets of documents).
There are probably also UCC-1 filing fees you'd incur too, though from my POV as a broker I never see them.
ali r.
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Response by fieldschester
about 9 years ago
Posts: 3525
Member since: Jul 2013
>Aaron, The application fees do not cover the costs. Shopping around is just getting quotes rather than locks which is just fine. Wasted extra cost crested by locking at multiple places increase the average cost of rate lock built into the mortgage rates for the borrowers who shop and only lock at one place.
This is a very socialist perspective. Marketing costs are part of the expected and known cost of doing business but more importantly they improve competitiveness and therefore innovation and service and cost for the consumer.
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Response by kmbroker
about 9 years ago
Posts: 116
Member since: Jan 2008
also if you apply to too many banks it will affect your credit rating
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Response by jaky
about 9 years ago
Posts: 48
Member since: Jul 2011
You'll have to answer why there are so many hard inquiries on your credit report from different entities.
Ellen is right. This time.
Ridiculous and baseless fear mongering from 300 and kmbroker.
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Response by SantaBarbaraLender
over 7 years ago
Posts: 0
Member since: May 2018
I’m answering this question as a loan officer who has worked most of her in a financial institution that was also a national bank.
You will be charged for an appraisal upfront by both lenders. Not all brokers charge their clients the appraisal fee upfront because it is their choice. You better be ready to explain the inquiry on your credit report to at least one of the lenders. Once the escrow and title fees are ordered, most lenders will find out that you are trying to obtain multiple mortgages as this will be a red flag for the title company when they receive multiple requests for the fees from different lenders. I am not saying you won’t get away with it . You just better be sure you have a final approval from at least one of her prior to them ordering fees. I know the national lenders wait until last minute to do this m, however, I work for a small bank and we do this upfront. That being said, we will be asking you about the multiple lender situation upfront if you are using another lender who is also either a broker or small bank or a lender who does this upfront. Hope this helps! P.S. I’ve been in the industry for 14+ years and am fairly confident of my answer. However, I have not worked as a broker so their answer may differ from mine. Another note, I am currently a correspondent lender for the small bank I work for. Which I assume makes me at least a little more knowledgeable as to what A broker is looking for. This is because we can sell loans to investors and also portfolio loans Brokers generally sell to investors. Please correct me if I am wrong. I do live to learn from my peers.
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It is a lot work to get the loan approved from each of the banks (incremental 20 hours for each at least). They may charge you for appraisal fee. In addition, it may impact your credit report to get a loan approved from many different banks. I would not comment on the ethics of doing this.
What is the ethical problem of shopping around for the rate/lock/timeframe that is most advantageous to you? Lenders compete for your business, and since you paid any entry fee (application fee, appraisal, etc.) but showed up for the party alone, you can go home with any one you choose, after seeing what sort of dancer they are.
Aaron, The application fees do not cover the costs. Shopping around is just getting quotes rather than locks which is just fine. Wasted extra cost crested by locking at multiple places increase the average cost of rate lock built into the mortgage rates for the borrowers who shop and only lock at one place.
I don't sell townhouses, but that might work if you were purchasing a townhouse.
However, if you are purchasing in a co-op or condo building, the building's board will require a formal loan commitment as part of your application. Getting to the commitment stage, as 300 Mercer notes, is not particularly cheap ( I just saw a mortgage bank charge a client $1,000 for appraisal plus lien search).
You could, in theory, have board approval on one loan commitment and then switch lenders, but in addition to the two sets of fees you'd be paying to get to two commitment letters, you'd have to have the managing agent approve the replacement lender, and the building's board would also have to redo the loan recognition agreements that they'd set up with the first lender. (Meanwhile, you, as buyer, would be on the hook for the attorrney's fees on both sets of documents).
There are probably also UCC-1 filing fees you'd incur too, though from my POV as a broker I never see them.
ali r.
>Aaron, The application fees do not cover the costs. Shopping around is just getting quotes rather than locks which is just fine. Wasted extra cost crested by locking at multiple places increase the average cost of rate lock built into the mortgage rates for the borrowers who shop and only lock at one place.
This is a very socialist perspective. Marketing costs are part of the expected and known cost of doing business but more importantly they improve competitiveness and therefore innovation and service and cost for the consumer.
also if you apply to too many banks it will affect your credit rating
You'll have to answer why there are so many hard inquiries on your credit report from different entities.
Shopping for a mortgage is the wise thing to do. http://www.consumerfinance.gov/askcfpb/2005/What-exactly-happens-when-a-mortgage-lender-checks-my-credit.html
Ellen Silverman, Mortgage Broker, NMLS# 60631
Ellen is right. This time.
Ridiculous and baseless fear mongering from 300 and kmbroker.
I’m answering this question as a loan officer who has worked most of her in a financial institution that was also a national bank.
You will be charged for an appraisal upfront by both lenders. Not all brokers charge their clients the appraisal fee upfront because it is their choice. You better be ready to explain the inquiry on your credit report to at least one of the lenders. Once the escrow and title fees are ordered, most lenders will find out that you are trying to obtain multiple mortgages as this will be a red flag for the title company when they receive multiple requests for the fees from different lenders. I am not saying you won’t get away with it . You just better be sure you have a final approval from at least one of her prior to them ordering fees. I know the national lenders wait until last minute to do this m, however, I work for a small bank and we do this upfront. That being said, we will be asking you about the multiple lender situation upfront if you are using another lender who is also either a broker or small bank or a lender who does this upfront. Hope this helps! P.S. I’ve been in the industry for 14+ years and am fairly confident of my answer. However, I have not worked as a broker so their answer may differ from mine. Another note, I am currently a correspondent lender for the small bank I work for. Which I assume makes me at least a little more knowledgeable as to what A broker is looking for. This is because we can sell loans to investors and also portfolio loans Brokers generally sell to investors. Please correct me if I am wrong. I do live to learn from my peers.