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can i change lenders after an appraisal because he is giving me a higher interest rate?

we have an offer accepted i have been pre approved with this lender who initially offered me a 3.5% rate on a first transaction that felt thru due to a very low appraisal and since we are doing  an FHA loan we couldnt go thru it,  now we are on a new one appraisal came in alright seller accepted the purchase price and we are good to go to the loan processing part.  i have already received disclousres and gfe from the lender with a NOT LOCKED interest rate of 3.625%  i am not happy with it since we were offered 3.5 before and about 3 months prior to that we were quote at 3.25 with a different lender, who we didn't stick with because he stop responding for a while.  we aren't getting any lender credits to close.  i need tips on how to negotiate my interest rate to at least the 3.5 we were offered in the first transaction.  i also not sure if i can switch lenders ( i feel reluctant about asking my agent because it happens to be the lenders wife).  i have put down a 5k deposit to  the escrow co.  i am concerned with what if anything 
  • March 28 2013 - Menlo Park
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Answers (35)

Profile picture for user5115446
My contingencies were up today. Lender said we were approved for the loan yesterday... Not sure if its worth it to switch now
  • March 30 2013
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You can definitely switch, but 3.625 compared to 3.5 isn't a huge difference.  I'm not sure if I would want to jeopardize losing the home  or a deposit to save an eighth of a point.  I also agree that for an FHA purchase loan that 3.625% seems really high.  Did you know how many points the lender is charging you? 

I work with a great mortgage broker, so if you would like some help with this, you can contact me and I will give you his information.
  • March 30 2013
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Profile picture for GMerino
The current lender is giving you a high interest rate, most of us on here agree.  Whether or not you choose to stay with your current lender is a choice that you will have to make.  i think it is fair to say that most of us here would be able to close your loan within a 3 week time frame.  If you have already ordered the appraisal, then you might not be able to transfer that over to a new lender.  Just know that it would be the lenders discretion to accept or not.  

Rates for an FHA home loan with lender credits are much lower than what you are getting.  Perhaps, your lender would be able to renegotiate your rate once your out of underwriting.  You should ask your loan officer if that is an option for you.  

If your looking to get a better deal, starting over would not be a bad idea and I am sure whom ever you pick to do your loan will be aware that you need to close soon.  
  • March 29 2013
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Given all that it is a pretty rough deal. 

In the long run 3.625% is not a bad interest rate historically, it is just way out of the current market and a competitive lender should be able to give you a credit in the $7-10,000 range at that rate.

What is the close of escrow date? If you switch 8 days will be unlikely, especially with the next two days being a weekend, but there are lenders that would be able to do it in 10-14 days. If that fits into your close of escrow timeline. 

I would be happy to take a look at your purchase agreement to see when everything has to be done and when you have to release your financing contingency (thus risking your $5,000 earnest money deposit).

Sincerely,
Greg
  • March 29 2013
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Profile picture for user3148032
Greg - 
our DP is 3.5% of 395k
i dont know if i am being completely screwed over... no lender credits, ive requested the lender to try to lower it to 3.5%.  i dont want to burn any bridges with him only because i asked the sellers agent if this will be an issue for the seller ( it will extend the closing period) and she said it might be because they want to close ASAP.  the current lender who is giving me 3.625% no lender credit said we can close within 8 days ( ive already submitted most f the underwriting paperwork) the transaction started March 15.  
  • March 29 2013
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I am licensed in your state and can assist you with a free quote.  What Geofrey mentioned about where rates and credits are is completely correct when checking my pricing off of the infomation you provided.












  • March 29 2013
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Profile picture for GMerino
You should be able to get a better rate than what is being offered.  You should be in the lower 3's with lender credits.  
  • March 29 2013
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Give us your scenario so we can tell you what is going on. So far we know...

You are buying a $395,000 house with an FHA loan, the low-Mid FICO is your husband's 660 (this shouldn't make a difference to the interest rate on an FHA loan). The only that we don't know is how much you are putting down. But this should also not make a difference in the interest rate in an FHA loan.

It is against Zillow's policy to quote rates here (as well as my company's policy) but I can tell you those rates are way off. You should be getting a HUGE closing cost credit at those rates you are being quoted. When I say HUGE I mean more than enough to pay all of your closing costs.
  • March 29 2013
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Profile picture for user3148032
i appreciate all trying to help but yes unfortunately i am more confused now.... 

all im trying to do is get a better rate, ive reached out to other lenders to provide me with quotes and the rate i am being offered is about the same 3.675-3.85...
  • March 29 2013
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Profile picture for CA Direct Lending
Stick to jumbos, Steve.  FHA is not your area of expertise.  If you don't know what you're talking about or "from what you read on HUD" and "you may be wrong", don't talk. 

Like Greg said, we are here to serve the consumer.  If it's not explicit, it should at least be implied that we have a responsibility to the Zillow customer to at least have experience in the area we're providing advice and preferably, be an expert. 

Reading up on a subject beforehand and guessing whether you're right doesn't serve the consumer well or you, for that matter.
  • March 29 2013
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Steve,

You are confused, confusing, giving erroneous information, and bad advice. That is unprofessional.

I am giving accurate information, including figures and calculations that directly apply to this buyer's transaction, but just because I am questioning your erroneous information and bad advice with facts and figures I am unprofessional?

What we are here for is to serve the consumer. Giving bad information only serves to confuse them. If you don't understand the guidelines don't say anything is the best course.

Greg
  • March 29 2013
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Steve if they already had an appraisal then they already have a case number. If they already have a case number, that case number would transfer to a new lender if they aren't happy with the current lenders rate and costs. The appraisal would also transfer. The MI rate would be based on when the initial lender had the case number assigned.
  • March 28 2013
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Greg... I am amazed how unprofessional you are!

You make no sense by comparing a rate they were offered months ago of 3.25% to a rate being offered now.  I hope you do not use funny math like that with clients.  Please explain to everyone the current and only offer of 3.625% to the old MIP and then the difference between the old MIP and you will make more sense because 3.25% has nothing to do with anything other than the y were offered it months ago and it no longer exists! 

From what I read on HUD (and I may be wrong) that the borrower must "certify at the time of requesting a case number that they have an active loan application for the subject borrower and property."  I would think that if they were to cancel the application and start new with another lender this would change. 

For "professional reasons" that I may have interpreted this incorrectly I added in HUDs website explain the changes being made in case my interpretation was incorrect. 

I agree with Joe and do think they are being taken advantage of but also do not think the deal shown on the estimate below is not any worse now than it would be if they were subject to the new HUD rules not matter how small or large that number may be.Be a Good Neighbor.  Be respectful!  See Zillows Good Neighbor Policy!
  • March 28 2013
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Also, Marci is absolutely not correct.

As mentioned below the April 1st FHA date doesn't matter because the case number goes with the property. If it has already been pulled by the current lender that is the only case number this property is going to have. 

Regarding the interest rate, it has nothing to do with what was quoted three months ago. It is how far out of the market the quote they are being offered today is.

Going further let's just say you both were right about the FHA MIP change making more of a difference than lowering the mortgage interest rate and payment would be...

The purchase price here is $395,000. Assuming a 3.5% down payment the loan amount would be $381,175. The difference in monthly payment on this loan from a 3.25% rate and a 3.625% rate is $79! The difference between the old and new MIP? $12.

So they are losing $67 a month taking your advice. Or $804 a year, or $4,020 in 5 years! This isn't even taking into account the fact that the MI payment shrinks with the loan balance.

And that is totally ignoring the fact that at today's market pricing the 3.25% should yield the buyer $3,000-$4,000 towards closing costs that they are not getting. So you can make that 5 year cost over $7,000!

Please stop giving people bad advice. Generally Zillow is a great place for consumers to get quality information from seasoned professionals. Let's keep it that way.

Sincerely,
Greg

  • March 28 2013
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Steven,

No one has mentioned the MIP change because the FHA case number goes with the property.

If you change lenders now, but still buy the same home, the case number just needs to be transferred to the new lender.

EVEN THE BUYER CAN CHANGE and so long as the case number for that property was already generated the new buyer will get the old MIP rates.

  • March 28 2013
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Just so everyone is not confused...

1. The change in MIP as of April 1 in minor compared to what it about .375% too high of a rate being offered.

2. Since the appraisal has been done, the case number has most likely been ordered.  The case number would transfer from one lender to the next so the April 1 date in not an issue

It really sounds like this guy is trying to take advantage of the fact the the realtor is his wife and banking on the fact that you will not rock the boat.


If you are not risking the dates in your contract, shop around and let him know that you are.  Maybe you can scare him into a more competitive rate.
  • March 28 2013
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I agree and would give Marci a thumbs up for best answer if she didn't type my exact words 1/2 hour after my post!  hahaha... It would have been nice to get one myself but her post does give you a better idea that you probably have the best deal your going to get at the moment.

At this point I would hope you do not lose the loan you have in process and burn bridges. 

Given what has been going on in Europe and you currently not being locked I would double check pricing with your current lender and ask if things have improved over the past few days.  You could possibly be at 3.5%.  I'm not sure if it would be worth risking to see if things improve but you may get lucky with the volitility we have seen in the market this week! 

Again, good luck and I hope our matching answers helped!!!

  • March 28 2013
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I would not switch lenders over a rate that was first qouted to you 3 months ago. Rates change daily sometimes by the hour. I would stay with your current lender. FHA MI chances on APRIL 1st.

Good Luck
  • March 28 2013
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I am amazed no one has mentioned that the MIP will be going up on April 1st and that there is no time left to change unless they are willing to pay for it dearly!

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-010

It would not be in your best interest to change lenders since another lender would have to have the case number and disclose the loan by tomorrow in order for you to not get hit with the new MIP changes.

I understand your frustration but changing now would hurt you more than taking what you are currently offered!

The closing costs are not the best but also not bad so my strong suggestion is not to lose what you are offered...

Good Luck!
  • March 28 2013
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When you say in your initial post you are on a new one, do you mean an entire new property or a new lender?

If you mean you tried to go to another lender after the first low appraisal, you should know that FHA appraisal tie to the property and you won't be able to replace that appraised value with another appraisal.   If you mean a new property then obvioulsy this is not an issue.

You can pick any rate you want for a FHA loan, you might have to pay more for it if the market has shifted, if you have prior lock from prior transaction, those locks also tie to the property and cannot be moved over to another property.

  • March 28 2013
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Looking at it total lender fees are in the normal range. All the other fees, the lender has no control over so they are what they are regardless of who you use.

I have no great concern over the fees, but that rate is way out of the market. Also the lack of lender credit, even if you were offered a lower rate, is concerning.
  • March 28 2013
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Profile picture for user3148032
purchase price 395k
funds needed to close 22k 
no lender credit 
zero points
  • March 28 2013
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here are the numbers i have been given so far.  
  • March 28 2013
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Well he works for you, not her or any other lender. The bottom line for you should be getting a loan at a market competitive rate/fee structure. The bottom line for him is having the escrow close.

Can I ask what your loan amount is? Even high balance FHA loans (over $417,000) give decent lender credits @ 3.25% and huge credits at 3.625%.
  • March 28 2013
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at Greg Cowart - i am not getting any lender or seller credits. none at all.  i have a credit score of 715 and my husban who is also ont he loan is at 660.  the reason why i am waiting on asking my agent is because it happens to be the lenders wife 
  • March 28 2013
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In my opinion your rate should be no higher than 3.25% for a FHA Loan with no lender credits being provided.
  • March 28 2013
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at Greg Cowart - i am not getting any lender or seller credits. none at all.  i have a credit score of 715 and my husban who is also ont he loan is at 660.  the reason why i am waiting on asking my agent is because it happens to be the lenders wife 
  • March 28 2013
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Just to clarify on the "rates have been increasing" comments. Yes, they have been increasing if looking back a couple months time.

But of late they have started going back down again and have been on a downward trend since March 8th. 

Will that continue? We don't know, it can always go either way (I expect it to continue to get better based on market fundamentals), but the short term trend has been towards lower rates, even though the long term trend has been towards higher rates.

Hope that makes sense.

Sincerely,
Greg
  • March 28 2013
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Profile picture for GMerino
Rates have been increasing so if your going to change lenders do it now.
  • March 28 2013
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In the long run it doesn't really matter who your lender is, as long as it gets closed and the seller gets their proceeds they are happy. But your purchase agreement MAY have your current lender's name written in if they are the one that wrote the prequal for you. It doesn't happen all the time but it does happen. If so it would be a good idea to let your Realtor know you want to switch lenders so there is no chance of any sort of breach of contract, as unlikely as it would be for the seller to pursue.
As far as the appraisal goes, if you change lenders it is highly likely you would have to would have to get a new one. Lenders that accept other company's appraisals are few and far between and your current lender would also have to approve the transfer. It is something that almost never happens anymore.
My biggest question is, WHY IS THE RATE SO HIGH? For an FHA loan even 3.5% is on the high side. Unless they are giving you a HUGE credit towards closing. Even at 3.25% you should be getting a nice large credit on an FHA loan. 3.625% should have a credit more than double the credit 3.25% would yield. With even the lower end of purchase prices in Menlo Park this would be many many thousands of dollars towards your closing costs as well as taxes/insurance. 
Do you need a large lender credit to close? Are they paying all of your closing costs and impounds? If so maybe the 3.625% rate would make sense. But if not I can understand why you are questioning it!
So in summary yes, you may switch. But I would want to check the purchase agreement to see what is says in the financing section (page 1, sections C-D, and also any addendums) and let your Realtor know ASAP if your current lender's name is in there. Then find a new lender ASAP so you can get started right away and close on time.

Hope this information helps. Let me know if I can help in any other way.

Sincerely,
Greg

Senior Mortgage Planner - 17 Years Experience
Partners Mortgage
  • March 28 2013
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