Can You Change Mortgage Lenders? How To Change Your Mortgage Lender

In today's day and age, there are a lot of reasons why homeowners are looking for new mortgage lenders. With mortgage rates dropping to historically low levels, now is a better time than ever to change your existing home loan.

If your new rate ends up being lower than your current rate, you will enjoy the luxury of reaping a considerable amount of money. Let’s explore what it takes to change your mortgage lender!

Can You Change Your Mortgage Lender?

Well, can you actually change your mortgage lender? Here, we will discuss if it is even possible to change your lender, why you might consider switching lenders, and how to carry out the process if you qualify.

Understanding Mortgage Lenders

A mortgage lender refers to a financial institution or bank that offers home loans. In addition, mortgage lenders typically have specific borrowing guidelines. Doing so enables them to verify your creditworthiness as well as your ability to repay a loan.

Lenders are responsible for determining terms, repayment schedules, interest rates, and other critical aspects of mortgages. In the event that you're a borrower, you won't get to choose who services the lender’s loans.

This is usually due to how loans are handled once you pay yours off and close your loan entirely. After closing, it’s not uncommon for a lender to sell your loan to external companies. This often can be done without the approval of the borrower.

Do Any Lenders Service Their Own Loans?

Some mortgage lenders boast the way they service their own loans. They will often handle the ongoing administration of the loans as well. So, although it’s rare, it is possible for mortgage lenders to service their own loans.

If you’re in search of a lender offering loans that they service, consider applying for a loan from one of the following banks:

  • Chase
  • Flagstar
  • Quicken Loans
  • Union Bank
  • US Bank

Reasons Buyers Switch Mortgage Lenders

When refinancing your mortgage, you don't need to stick with your existing lender. Here are the main reasons why you may want to switch to a new mortgage lender!

There May Be a Better Deal Available

You may assume that switching lenders will enable you to score a better mortgage rate. This can actually be done with the help of an account in good standing as well as a solid history of on-time loan payments.

However, different mortgage lenders will boast various loans and borrowing requirements. For example, a lender you've never worked with may offer you a 3.2% rate on your mortgage refinance whereas your current lender may be offering a 3.35% interest rate. It’s all relative, and it doesn’t hurt to look around at interest rates being offered by other mortgage lenders.

You Are Unhappy With Your Customer Experience

Some homeowners may have a bad experience with their mortgage lender. If this is the case for you, there are some ways you can handle this situation.

Document Every Conversation

Make sure you keep records of every interaction you have with your lender. Remember the names of the employees you spoke with, the date of the conversations, and what they told you.

In the event that the issues escalate, you'll have detailed notes to use as proof of mistreatment by your lender, which will make it easier to hold your mortgage lender accountable.

Boast a Clear Plan of Action

Before you start working with an organization, make sure you have a clear goal in mind. Get ready to articulate your desired outcome when speaking with potential lenders. That way, your lender will be on the same page as you, and if they go against your wishes, it will be in writing.

File a Complaint with the CFPB

The Consumer Financial Protection Bureau (CFPB) allows customers to submit complaints online. Make sure you organize your receipts, conversation transcripts, and notes before setting out to file a complaint. The more organized and detailed your complaint is, the better the outcome will be!

How to Change Mortgage Lenders

Before you change your mortgage lenders, it’s important to understand the rules and regulations of the process.

Mortgage Lenders Transfer Rules

Before you change your mortgage lender, it’s suggested that you make sure you have already been pre-approved by your new lender. The great thing about this is that the pre-approval process is not extensive. It’s usually done before you make the offer.

Assuming that you already have a mortgage, chances are you've gone through the pre-approval process before. So, all you have to do is repeat the process as soon as you're ready to change lenders.

When seeking a new mortgage lender, make sure you're transparent and let your real estate agent know. After you are pre-approved by the new lender, it’s important that you provide your real estate agent with your new pre-approval letter.

Drawbacks of Changing Mortgage Lenders

Changing your mortgage lender comes with several drawbacks, the most obvious of which is the delays. Here are a few other cons of switching mortgage lenders!

Different Rates

If you've scored a low rate with your most recent lender, it doesn't mean that your new lender will adhere to that same value. The quote you receive from your new mortgage lender will depend on the industry trends as well as your credit score.

These may change over time, and as such, they will differ from the rates you were quoted by previous lenders. Based on these two factors, your interest rate could end up being higher than prior loans, so getting a new lender can sometimes be detrimental in a financial sense.

High Closing Costs

Closing costs vary from lender to lender. Your new mortgage lender may charge additional fees or higher rates than you were used to with your previous lenders. For this reason, it's essential to compare the costs and fees of a potential lender before committing to making the switch.

New Lender Means Another Credit Check

It's likely that your previous mortgage lender already pulled your credit before starting the process for your loan. Lenders like to conduct credit checks before considering you for a loan because your interest rate will heavily rely on your credit score and subsequently influence the rate your new lender decides to offer to you.

Time to Get a New Appraisal

All lenders will require an appraisal before they’ll consider issuing a loan. An appraisal tells the lender that their money will be easy to recover even if you’ve defaulted on a previous loan.

You will need to pay an additional service fee when the loan payment is made to cover the costs of the appraisal. You might also have to pay other fees that were already pre-paid with your old lender.

Where to Go From Here?

Despite the drawbacks of changing mortgage lenders, making the switch is still worthwhile because signing with a new mortgage lender also comes with numerous advantages. While your primary focus should be ensuring that you're as happy with your loan terms as you are with your new house, it's essential that you choose your lender wisely.

Consider shopping around for the best rates. Furthermore, make sure you compare each lender by asking about closing costs, additional fees, and customer service protocols.

After selecting a new lender, communicate the details of your new loans to your new agent, the escrow agent, the seller, and other involved parties. This way, you can foster a deep relationship with your lender and real estate agent which will lead to a foundation of trust.


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This page last updated: March 21, 2022