Can I Switch Lenders After Appraisal?

The mortgage process can involve unexpected turns, leading some to consider changing lenders even after an appraisal. Understanding the implications of such a change, especially concerning the existing appraisal, is important. This article explores the possibility of switching lenders after an appraisal and outlines the factors involved.

Deciding to Change Lenders

Borrowers can generally change mortgage lenders even after an appraisal is completed. Federal consumer protection laws allow home buyers to switch lenders before the final loan agreement is signed. This flexibility provides an opportunity to seek more favorable terms or address concerns.

Borrowers often switch lenders to secure better loan terms. A new lender might offer a lower interest rate, leading to substantial savings over the loan’s life. Fluctuations in market interest rates or an improved credit profile can create such opportunities. Comparing the annual percentage rate (APR) from different lenders helps assess the true cost of each loan.

Dissatisfaction with the current lender’s service or communication is another common motivation. Delays in processing, unresponsiveness from loan officers, or a lack of transparency can prompt borrowers to look elsewhere. Additionally, if a lender’s initial terms change between pre-approval and final approval, or if they decline final loan approval, borrowers may seek alternatives.

Understanding Appraisal Transferability

Lenders typically order appraisals for evaluating loan collateral. The ability to transfer or re-use an existing appraisal with a new lender depends on several factors. A new lender must accept the appraisal, often reviewing its contents to ensure it meets their specific requirements and industry standards.

The type of loan is a key determinant. Appraisals for FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans are often more portable than conventional appraisals. FHA appraisals are tied to a case number assigned by HUD, allowing transfer to a new FHA-approved lender upon borrower request. This transfer usually occurs within a few business days if the borrower paid for the original appraisal.

For conventional loans, appraisal transferability is less standardized and depends on the new lender’s policy. Many conventional lenders prefer to order their own appraisals to ensure compliance with internal guidelines and investor requirements, such as those set by Fannie Mae or Freddie Mac. A new lender might require a new appraisal if the original appraiser is not on their approved vendor list or if the appraisal is older than a typical validity period (90 to 120 days). The appraiser’s independence and proper licensing are also important for any appraisal to be considered valid.

Navigating the Lender Switch Process

To switch lenders after an appraisal, first communicate with the original lender. While no specific withdrawal fees are typically associated with changing lenders, any non-refundable fees already paid, like an application fee, may be forfeited. If the borrower paid for the appraisal, they should request a copy for their records, though this does not guarantee its acceptance by a new lender.

After selecting a new lender, the borrower must complete a new loan application. This involves providing financial documentation like income verification, asset statements, and updated credit information. The new lender will conduct their own underwriting review, which may include a new credit check, potentially causing a minor, temporary impact on the borrower’s credit score.

Inform the new lender that an appraisal has already been conducted. For FHA loans, the new lender can request the transfer of the FHA case number and associated appraisal from the previous lender. For conventional loans, the new lender will review the existing appraisal for acceptance. If acceptable, they will use it; otherwise, they will order a new appraisal, and the borrower will pay this new cost.

Costs and Timeline Impacts

Switching lenders after an appraisal can introduce additional costs and extend the closing timeline. The most significant cost is paying for a new appraisal if the original is not accepted or transferable. Appraisal fees typically range from $400 to $700. Any non-refundable application or processing fees paid to the original lender will likely be lost. The new lender may also have their own application or origination fees, which should be reviewed.

Switching lenders almost always extends the closing timeline. Starting a new application, undergoing new underwriting, and waiting for a new appraisal can add several weeks. While FHA appraisal transfers are relatively quick, conventional loan processes may take longer. This delay can be problematic if the home purchase agreement has specific deadlines for loan approval or closing.

An extended timeline also risks a rate lock expiring. If the initial interest rate was locked with the original lender, that lock is lost upon switching. The borrower will need a new rate lock with the second lender, and market rates may have changed, potentially resulting in a higher interest rate. Delays might also lead to per diem charges from the seller if the closing date is pushed back.