Can you work with multiple lenders when buying a new home?
Before my buyers sign the purchase agreement for their brand new home, I always make sure they understand the financing terms. Unlike the resale homes, new home purchase contract are drafted by the builders and are typically slanted heavily towards the builder. They offer little protection to the buyer, specially around financing.
Understandably, some buyers are very nervous about this, and sometime they choose to “double app” the loan - working with two lenders at the same time(paying two credit report, two appraisals etc) to increase the odds of being able to close one.
While I’m not a big fan of this approach, I do understand there are times when the buyers need that extra safety net when buying their new home.
In my experience, here is what you should know:
It’s common to double app when buying brand new homes.
This is because new homes typically takes a few months to close, so you will have time to work with another lender if you think the first lender might not perform. Another common scenario is if the buyer already have a lender, but builders requires everyone to go through the approval process again with their preferred lender. so the buyer might decide to work with both lenders, since he/she already submitted the paperwork for both lenders anyway.
Be fair and honest to both lenders
If you are thinking about working with multiple lenders, be transparent with both lenders. And let the second lender know why you are applying with them. Many lenders will not like to be put in this position, but some might decide to still put in full effort and win your business over. If you don’t, it’d be hard to explain when they later find out from your credit inquiries.
Let the builder know that you are applying with two different lenders.
The builder needs to know because the sales rep in the office will need to walk through the house and upgrades with both appraisers. In my experience, builders don’t mind if you applying for multiple lenders. Many even encourage you to double app as it increases your odds of closing the escrow in time.
Work with experienced lender can sometimes save you the hassle of applying with multiple lenders
The reason most of the buyers feel the need to double app is that they don’t want the lender to come back last minute and tell them they can’t get the mortgage. While anyone can enter your information into the computer, inexperienced lender tends to overlook important information that is not raised until further down the road. A good experienced loan officer or broker can catch red flags early on when they review your information. If they think there is a risk might not able to pass the underwriter, the loan officer or broker can tell you ahead of the time, avoid the situation when you submit the application but gets denied later.