It's a common misconception that buyers can only be preapproved by one lender and are required to use that lender when buying a home. In reality, you can apply to multiple lenders, and here are a couple of reasons you should get approved by at least two before bidding on a piece of property.
Negotiate the Best Terms
Having multiple confirmed offers makes it easier to negotiate the terms of your mortgage. Banks typically make over six figures in interest fees on every 30-year mortgage. For instance, the interest generated on a 30-year mortgage for a $374,000 home at 2.78% interest is a little over $142k. So, if they think they're going to lose all that profit to a competitor, they're more willing to offer better terms to keep you.
Thus, don't be afraid to cast a wide net when applying for mortgages. Select the ones you prefer, and then use the other offers to haggle for the best mortgage rate possible.
You do need to take care to avoid damaging your credit, though. Credit reporting agencies treat multiple mortgage applications as though they were a single inquiry, which minimizes the impact to your score. However, this only applies to applications submitted within 2 weeks from the first query. Applying for loans outside of this timeframe could lower your score and make it harder to get approved.
Protect Against Unexpected Denials
If you're like many people, you probably think that getting approved for a mortgage guarantees the lender will give you the money when it's time to close. Unfortunately, this isn't always the case.
Sometimes lenders will rescind their offers. This is usually because something changed in the homebuyer's financials that caused concern about repayment (e.g. a big dip in credit score or loss of income). However, there could be an issue with the property or the bank itself could be experiencing financial trouble.
Whatever the reason, the loss of financing usually ends the home sale quest, but this doesn't have to be the case. If you have preapproved offers from other banks, you can contact the other lenders to see if they'll take over the loan. Provided there isn't a significant change to your financial situation, the backup lender is usually only too happy to step in and save the day.
Getting multiple preapproved mortgages is a smart financial strategy when buying a home. For more information on the application process or to get current interest rates, contact a company such as AJM Mortgage Inc.
Share28 October 2022
I always wanted to buy my own home and after saving enough money for a down payment, I decided that it was time. Before I started looking at houses, I talked with a loan officer about financing. I wanted to know how much money I could borrow so I could look at houses in that price range. I was very happy after my meeting at the loan company and I was ready to start house hunting. My name is Jarod Spangler and I'm now a homeowner. If you have the dream of owning your own home, I think you'll find my blog of help to you. I've documented my journey of saving money, securing a loan and purchasing a house. To help you become a homeowner too, I'm offering advice and tips of things that I've learned along the way.
