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What Happens If I Change Lenders Midstream?

It doesn’t happen very often, but it does happen. Someone submits a loan application to a lender and, for whatever reason, decides to transfer the entire loan file to someone else. Maybe what you were initially quoted doesn’t quite add up to what you’ve now been told. That doesn’t happen very often but when it does it’s typically a communication problem. Lenders don’t stay lenders very long with a history of bait-and-switch tactics. Or, maybe you just don’t like your loan officer or your bank. Whatever the reason, switching lenders midstream can be done, just know in advance what to be on the lookout for.

For one, if there’s an appraisal being needed and it’s been completed, you might want to transfer the current appraisal to the new mortgage company. But there’s a couple of things that can happen here. One, even though you paid for the appraisal, it’s the lender who actually owns it. The lender’s name is on the appraisal, not yours. That might not make much sense at first glance, after all, you paid for something so it should belong to you, right? Actually, if a lender requires an appraisal there’s nothing that says the lender should pay for it. Lenders can offer an appraisal credit or lender credit to offset certain closing costs, but the appraisal is still the lender’s.

This brings up another issue. You’ll need to cancel the current application and request your stuff back. However, certain lender-generated documents will stay with the current lender. You’ll need to dig up some new paystubs and most likely your bank statements have aged a bit so you’ll need those too. But if the lender has pulled a credit report, which is likely at this stage, you can’t have that. Besides, it will have the lender’s name on it. You can request what is called a ‘re-type’ but you’ll be charged a fee for that.

Finally, you need to make sure the new lender has the existing appraiser on their approved appraiser list. You might find that you can transfer the appraisal and have it re-typed for the new mortgage company’s name but this is less and less likely in today’s market. A lender might not have the appraiser on their approved list and you’ll need to get a new one anyway.

There will be some other tidbits of tidying up the transfer, and it can typically be done. But with the additional time and effort involved, maybe it’s better to just grit your teeth and charge forward.