Can You Change Loan Officers Before Closing?
Considering a new loan officer before closing? Learn the possibilities, steps, and crucial implications for your home loan process.
A loan officer guides individuals through the home buying or refinancing journey. They assess a borrower’s financial health, explain mortgage options, and facilitate the pre-approval process. This professional also gathers necessary documentation and communicates with other parties involved in the transaction. Circumstances can arise, however, where a borrower might consider changing their loan officer.
When a Change is Possible
Changing a loan officer during the home buying or refinancing process is generally possible until the final loan agreement is signed at closing. The ability to change depends on how far along you are in the mortgage process. Early stages, like pre-approval or initial application, offer more flexibility. As the loan moves into underwriting and closer to closing, changing becomes increasingly complex and disruptive.
Securing a mortgage progresses through distinct phases: pre-qualification or pre-approval, formal application, processing, underwriting, and finally clear-to-close and closing. Federal consumer protection laws allow borrowers to change lenders until the final loan agreement is signed. However, the practical implications of doing so escalate with each completed step.
Changing a loan officer involves two scenarios: remaining with the same lending institution but requesting a different officer, or switching to an entirely new lender. Staying within the same institution might be less disruptive, as some documentation may already be on file. However, moving to a new lender necessitates starting a new application and re-submitting all financial documents.
Steps to Initiate a Change
Initiating a change of loan officers requires action, whether you remain with your current lender or move to a new one. If dissatisfied but wishing to stay with the same institution, communicate concerns to the loan officer’s manager or customer service. Request a new loan officer. This approach allows for a smoother transition as some initial application data may already be in the system.
If you switch to a different lending institution, the process involves starting a new loan application. You will need to gather all financial documents again, including income statements, tax returns, and bank statements, to apply with the new lender. Obtaining a new pre-approval letter from the prospective lender is a prudent initial step. It provides an estimate of how much you can borrow and signals your seriousness to real estate agents and sellers.
Once you secure a new lender, formally withdraw your application from the previous one. Inform your real estate agent and the seller of the change. Providing your real estate agent with the new pre-approval letter and discussing the revised timeline helps manage expectations and maintain transparency with all parties involved.
Understanding the Implications of a Change
Changing loan officers, especially when switching to a new lender, can impact the loan process and the borrower. This includes potential delays in the closing timeline. A new lender requires time to process the application, conduct underwriting, and fulfill requirements, which can add weeks or more to the original closing schedule.
Resubmitting documentation is another common implication. Even if you provided documents to your initial loan officer, a new lender will require a complete set of financial statements, pay stubs, tax returns, and other supporting materials. This duplication of effort can be time-consuming and may necessitate gathering updated versions of certain documents.
Switching lenders also impacts your credit profile. A new loan application triggers a hard inquiry on your credit report, which can cause a temporary, slight dip in your credit score. While multiple mortgage-related inquiries within a specific timeframe (often 14 to 45 days) are grouped as a single inquiry for scoring purposes, initiating a new application outside this window could result in an additional credit score impact.
An existing interest rate lock is lost when changing to a new lender. If you locked in a favorable rate with your original lender, you would need to secure a new rate lock with the new institution, based on current market rates. This means you could end up with a higher interest rate if market conditions have shifted upwards since your initial lock.
Borrowers may incur duplicate fees when switching lenders. Common fees that might need to be paid again include application fees, which can range up to a few hundred dollars, and appraisal fees, typically costing between $300 and $600 for a conventional loan. While FHA and VA loan appraisals are sometimes transferable, conventional loan appraisals often are not, requiring a new one to be ordered and paid for. Some new lenders may offer to cover certain fees to attract your business; confirm this upfront.
Clear communication with all involved parties is important. Your real estate agent and the home seller must be promptly informed of your decision to change lenders to manage expectations regarding the closing date. Delays caused by a lender switch could lead to the seller imposing per diem fees for extended closing periods or withdrawing from the purchase agreement if the new timeline is unacceptable.