Two mortgage applications

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Topic Author
RyeBourbon
Posts: 413
Joined: Tue Sep 01, 2020 12:20 pm
Location: NJ/Philly

Two mortgage applications

Post by RyeBourbon »

I am purchasing a new construction home in a development by one of the large national builders. The contract was signed in February with estimated delivery in October. As the summer progressed, the builder hinted that it would probably be November. Each time we discussed a closing date, it was made clear by them that due to supply chain issues, the projections were estimates and we would get a firm date as we got closer. All along, I worked an application with their associated mortgage company.

All of a sudden, we got a closing date three weeks out. Discussions of locking the rate started, and I was unable to get a rate from them I was happy with, not to mention the closing costs. I declined to lock telling them that I was going to shop around. I started a new application and locked with an online lender at 50 basis points less (30 year fixed). The new lender promises to close on the requested date.

In the meantime, today I received the appraisal report from the original lender. They are proceeding as if I will be closing with them.

I was under the impression that I wasn't committed to the first lender until I locked a rate. Did I get it wrong?
I expect to get the second approval tomorrow. Should I just withdraw my first application at that point?
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KingRiggs
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Location: Indiana

Re: Two mortgage applications

Post by KingRiggs »

We are embarking on the same journey, just about to sign the contract on the house. CLosing projected to be between July and October 2022.

My understanding is that 45 days before projected closing, the loan terms are set (rate floats until then). My plan is to have an application in with a local lender known to us when we get about 2 months out from house completion. The closing costs especially seem very high with the mortgage company owned by the home builder, even with a $7k credit on closing costs.
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mmhere
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Joined: Wed Oct 13, 2021 7:55 pm

Re: Two mortgage applications

Post by mmhere »

Can't help you with your situation though I may end up with the same. Who is your second lender? Better?
JfonLA
Posts: 6
Joined: Tue Jul 27, 2021 7:16 pm

Re: Two mortgage applications

Post by JfonLA »

You are never committed to a lender until you close the loan. You may be on the hook for the appraisal if you have given them your intent to proceed. Maybe for an application fee as well, but you are not obligated to get a loan with them, even with a rate lock.
DMB41
Posts: 36
Joined: Fri Nov 20, 2020 2:55 pm

Re: Two mortgage applications

Post by DMB41 »

I'm with JfonLA on this, I believe you have the right to choose whatever lender you want maybe unless you signed something in the contract stating otherwise. I'm in a similar position to you and my contract has a preferred lender, but states a few times that I am free to choose who I want. It explicitly states: "Purchasers reserve the right to switch lenders at time of rate lock."
Topic Author
RyeBourbon
Posts: 413
Joined: Tue Sep 01, 2020 12:20 pm
Location: NJ/Philly

Re: Two mortgage applications

Post by RyeBourbon »

mmhere wrote: Wed Oct 13, 2021 7:58 pm Can't help you with your situation though I may end up with the same. Who is your second lender? Better?
Not Better. Aurora Financial. Getting 2.875% no points no fees.
randles
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Joined: Fri Sep 14, 2012 3:07 pm

Re: Two mortgage applications

Post by randles »

Reread your contract. Many times builder contracts offer an incentive to obtain financing through their preferred lender. There may also be "change of lender" terms in the contract with administrative fees payable to the builder in the event you choose to change lenders.

Another thought is to give the original lender the opportunity to match the more favorable terms you have come up with before making the jump.

Good luck!
humblecoder
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Joined: Thu Aug 06, 2020 8:46 am

Re: Two mortgage applications

Post by humblecoder »

RyeBourbon wrote: Wed Oct 13, 2021 3:02 pm I was under the impression that I wasn't committed to the first lender until I locked a rate. Did I get it wrong?
I expect to get the second approval tomorrow. Should I just withdraw my first application at that point?
Yes, you got it wrong. Locking the rate is unrelated. Many lenders can let you float the rate up until right before closing.

Perhaps the second lender can use the appraisal from the first lender without charging you a new appraisal fee.
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