You can change mortgage lenders at any time before you close on your loan, although waiting too long may cause you to miss your closing deadline, which can have negative consequences.
Choosing the right lender can make or break the home-buying experience. But if you've already begun the process with one mortgage company, can you switch to a different lender for your loan?
Yes, you aren't obligated to any specific lender until you close on your mortgage. However, whether it's practical to do so depends on a variety of factors. In some cases, switching lenders can be risky, and the longer you wait, the riskier it gets.
Changing Lenders During the Mortgage Process
It's not uncommon for prospective buyers to change lenders during the mortgage process. You aren't committed to working with the first company you apply with, even if you've already been preapproved or have placed an offer on a home.
What could cause a borrower to want to change mortgage lenders once the loan process is already underway? Some common reasons include:
Better interest rates or loan terms
Lower upfront closing costs
Concerns over loan approval or the lending timeline
Issues with customer service or timely communication
However, switching too late may cause you to miss your closing deadline and forfeit your earnest money deposit. You could also lose out on any lender fees you’ve already paid. In some cases, you may even lose the home you have under contract if the new company can’t process your loan in time and the seller isn’t willing to agree to an extension.
“As a real estate investor, I've navigated the complexities of switching lenders after securing a property under contract, and I'll tell you – it can be done, but timing and strategy are key,” says Cesar Villaseñor, owner and founder of Click Cash Home Buyers.
Key Stages in the Mortgage Process – And What Happens If You Switch
So, when is it too late to change mortgage lenders? The most important factor is where you are in the lending process. We'll break things down into four key stages and review the risk level for each.
After Preapproval – Before You Make an Offer
If you've been preapproved for a loan but haven't yet put in an offer on a home, now is the perfect time to switch lenders. You aren't locked into working with your current company; other lenders can get you preapproved within days.
In fact, you typically want to shop around for preapproval with a minimum of three mortgage providers to ensure you’re obtaining the best deal on your loan.
“A borrower should make sure they do their lender due diligence prior to starting the loan to make sure these issues don't pop up after they are in the loan approval process,” recommends Doug Perry, strategic financing advisor at Real Estate Bees.
A borrower should make sure they do their lender due diligence prior to starting the loan to make sure these issues don't pop up after they are in the loan approval process.
Worried about how applying with multiple lenders could impact your credit? Under the VantageScore system, multiple mortgage inquiries within a 14-day timeframe are combined as a single event. Under the FICO credit score system, this window is expanded up to 45 days. Most lenders use the FICO system, giving you plenty of time to shop.
After Offer Acceptance – Before Loan Processing Starts
It’s still possible to switch lenders once you have a home under contract, but things can begin to get more complicated depending on your borrowing needs.
Well-qualified applicants will likely run into few issues at this point, but those with lower credit scores, higher debt levels, or who are self-employed business owners may face longer underwriting times.
The transition will probably be smooth if you're switching to a lender you’re already preapproved with. However, starting the process from scratch with a new company will require you to resubmit all of your documentation and wait for everything to be processed. While this can often be completed in a timely manner, every day counts once you've had an offer accepted.
“Switching lenders can be pretty straightforward if you're early in the process and haven't locked your rate or started underwriting. But it becomes trickier once the appraisal is done or you're close to closing,” comments Jimmy Welch, real estate agent and president of the Jimmy Welch Team.
Switching lenders can be pretty straightforward if you're early in the process and haven't locked your rate or started underwriting. But it becomes trickier once the appraisal is done.
Midway Through Processing or Underwriting
If your loan is already being processed, switching lenders may still be possible, but the risks begin to increase drastically. If you've already completed your appraisal, it can be quite challenging to change lenders and still close your loan on time.
This is because the appraisal and any required inspections may not transfer. If not, you’ll have to schedule an entirely new appraisal, which could sometimes take up to two weeks. Even when the appraisal report can be transferred, the process isn't always instant.
“After managing dozens of lender transitions during active transactions, the primary timing factor is appraisal completion by the initial lender; replacing it afterward complicates matters significantly,” reports Seann Malloy, attorney and managing partner of Malloy Law Offices.
Keep in mind that the new lender will need to restart the underwriting process, which can add significant delays depending on how far along you were with the previous company.
“The 'point of no return' usually sets in about 10-14 days before closing, by which time changing lenders might risk losing earnest money deposits or facing breach of contract situations,” says Villaseñor. “To mitigate these risks, it's essential to maintain clear communication with your real estate agent along with the seller, and possibly negotiate an extended closing date, if necessary.”
After Reaching ‘Clear to Close’ Status
Once underwriting is complete and you've been given the clear to close, it’s almost always too late to switch lenders – at least in accordance with your original timeline.
It may be possible to negotiate an extension with the seller, but this is not always an option. They're not obligated to agree to a delayed closing, and many who do will request you pay a pier diem fee for every extra day needed.
At this point, even lenders who advertise rushed processing are bound by certain legal limits regarding the loan approval timeline set by TILA-RESPA Integrated Disclosure standards, or TRID.
“A serious, often missed, risk involves TRID disclosure rules, which mandate non-waivable waiting periods between initial disclosures and closing, setting firm minimum transaction timelines that buyers often don't foresee,” comments Malloy.
Risks of Missing Your Closing Date
As mentioned, the primary risk of switching lenders after you have a home under contract is missing your closing date. This can lead to:
Losing your earnest money deposit
Having to pay the seller extra fees to extend the contract
Potentially losing the home if the seller doesn't agree to an extension
“Every day counts in a real estate transaction. A delay can put your earnest money at risk or cause sellers to walk, especially in a competitive market,” cautions Welch.
In some cases, the seller may even be able to sue you for monetary damages they incur due to a breach of the purchase agreement. This is less of a risk for first-time homebuyers who often don't have considerable assets and aren't typically purchasing high-value properties where the delay could cause the seller sizeable damages. Nonetheless, the potential for legal action is still there.
Also, be sure to read through the terms of any contract you've signed with the real estate agent representing you. While not common, some buyer's representation agreements may contain clauses that leave you on the hook for covering the agent's fees if your deal falls through and you don't end up closing on the home.
Added Risks by Loan Type
In addition to timing, another critical factor that determines the riskiness of changing lenders is the type of loan you're applying for. Different loan types have different guidelines lenders must follow, some taking longer to process than others.
However, with any type of loan, the sooner you make your lender switch, the better, Malloy advises. “When clients consider changing lenders, transaction timing is more significant than the loan program. Early changes facilitate smoother transitions, while late changes increase risk, regardless of the loan.”
Conventional Loans
Generally speaking, conventional loans have the lowest level of risk when changing lenders after you have an offer in on a home. These mortgages are easier to process and have less red tape than their government-backed counterparts.
“For conventional loans, the process can move faster than with FHA or VA loans, which often have stricter guidelines and longer timelines,” says Welch.
Already had your appraisal? In some cases, you may be able to transfer the completed report to your new lender, although this is not guaranteed. Your original mortgage company is not obligated to send it over, and even if so, your new lender isn’t required to accept it.
FHA Loans
Hoping to change mortgage lenders with an FHA loan? This can be a little riskier for a couple of different reasons:
Transferring the FHA Case Number: All FHA-backed loans are assigned a 10-digit case number when you begin the mortgage process. You're allowed to switch lenders, but the case number must be transferred to the new mortgage company. You’ll typically need to request this in writing, and processing the transfer can take time.
FHA Lender Overlays Can Vary: The FHA has some of the most lenient guidelines for obtaining a loan. However, lenders are free to impose their own, more restrictive requirements – referred to as overlays – which can vary from company to company. It’s possible to run into issues if your new mortgage provider has overlays you aren’t expecting and aren’t able to meet.
“Government-backed loans make switching even tougher. They carry extra rules and move more slowly. If you're in one of those programs, waiting too long can box you in,” says John Gluch, real estate agent and owner of the Gluch Group
However, FHA loans have one advantage when switching lenders midway through the process: FHA appraisals are tied to the property and can be freely transferred from one company to another.
Government-backed loans make switching even tougher. They carry extra rules and move more slowly. If you're in one of those programs, waiting too long can box you in.
VA Loans
VA loans are only available to applicants who qualify for a Certificate of Eligibility (COE) from the Department of Veterans Affairs. If you switch lenders, the new company must re-verify your COE.
In most cases, this can be done in seconds through the VA’s Automated Certificate of Eligibility (ACE) database. Sometimes, though, lenders may need to wait up to five business days to receive eligibility confirmation from a VA Regional Loan Center.
“Government-backed financing, especially VA loans requiring Certificate of Eligibility processing with a new lender, has a narrower feasibility window for such transitions due to potential delays,” warns Malloy.
Additionally, VA mortgage applications have an assigned Loan Identification Number (LIN), which must be transferred to the new lender. Your original lender can do so online through the VA’s Loan Guaranty Hub, but the transfer may take up to five business days in some situations.
Lenders also have to be approved by the VA to issue VA-backed loans. Even then, some may only process a handful of VA loans per year. This can lead to delays if your chosen lender isn't thoroughly familiar with navigating the agency-specific lending process.
However, like with FHA loans, VA appraisals can be transferred between mortgage companies. There may be a slight wait, but it will save you time and money compared to ordering and obtaining an entirely new appraisal.
USDA Loans
USDA loans already have a reputation for taking longer to close than other types of mortgages. If you’re changing USDA lenders, you’ll want to do so as early in the lending process as possible.
Some of the factors that can delay USDA mortgage processing when changing lenders include:
Like other non-conventional loans, USDA mortgages have an assigned loan number that must be transferred to the new lender.
Your new lender must re-verify that the property you're purchasing is in an acceptable rural location and that your household earnings meet USDA income limits.
All loans must be approved by the local Rural Development Office. Seeking approval can take a week or longer in some cases.
Plus, unlike other government-backed loans, USDA lenders are not required to transfer completed appraisals to your new mortgage company. If your original lender won’t issue the transfer – or if your new lender won’t assume responsibility for a previously completed report – you’ll need to begin the appraisal process from scratch.
Jumbo Loans
The timeline for changing lenders is a little more varied when it comes to jumbo loans. That’s because there are no standardized rules for jumbo mortgages; the underwriting and approval process can vary greatly by lender.
However, these larger loans tend to involve stricter documentation requirements and a longer underwriting process, making it essential not to wait too long to switch companies.
There’s also no appraisal transfer standard for jumbo loans, meaning you’ll most likely need to wait for a new appraisal if you’ve already completed that step with your current lender. In some cases – especially with high-dollar jumbo loans – you may even be required to obtain two separate appraisals to confirm the property’s value.
How to Minimize Risk If You Do Decide to Switch
Regardless of where you’re at in the lending process, there are some best practices you can follow to minimize the risk if you do decide to switch mortgage companies. While these steps won’t guarantee you’ll be able to close on time, they will improve your chances.
Begin the process with the new lender before cutting ties with the old one: If you already have a property under contract, don’t drop your current lender and then start the search for another company. Find and coordinate with your new lender before cutting ties with the original.
Be upfront about your timeline and contractual obligations: Need to close in two weeks? Make sure that your new lender knows this upfront so they can give you an honest opinion on whether it’s possible to meet your deadline.
Look for a new lender willing to accept your appraisal report: If you've already completed the appraisal with your current lender, look for a new company willing to accept the existing report. There's no guarantee the old lender will agree to the transfer, but having a new lender open to receiving it could save you a week or more in processing time.
Let your real estate agent know: If you’re planning to change mortgage lenders, keep your real estate agent in the loop every step of the way. If it doesn’t look like you’ll be able to meet your existing closing date, they can help you navigate an extension and keep the deal from falling apart.
“If you're thinking about making a change, don't guess. Get a full cost breakdown from the new lender. Compare it to what you already have. Talk to your agent. Ask what impact it might have on your timeline,” recommends Gluch.
Improving Your Terms if It’s Too Late to Switch
If you’re approaching your closing date and it’s too late to change lenders, you may still have options. While your current mortgage company does not have to alter your agreed-upon interest rate or terms, they may be willing to make concessions to keep the deal from falling apart. Remember, lenders don’t get paid until your loan closes.
If you’ve received a more favorable mortgage estimate from another company, show it to your lender and ask if they can match the interest rate or terms. Lower closing costs elsewhere? They may be willing to offer a fee reduction, particularly when it comes to lender-specific charges such as origination, processing, or rate lock fees.
Considering switching because of sub-par service from your current company? Escalate your case to a manager and request a new loan officer or that they personally look into any underwriting delays.
Final Thoughts: Is It Worth the Risk?
Switching lenders before closing is possible, but the earlier in the lending process you do so, the better. If you are preapproved and have yet to pick out a home, you're in the clear. Once you have a property under contract, things begin to get a little more complicated. After the appraisal is completed, your chances of closing on time decline with every passing day.
Want to know for sure if it’s too late to change mortgage providers? Get in touch with an experienced loan professional and discuss your individual timeline and borrowing needs.
