Shopping around for the best mortgage rate and product can be an excellent exercise to save you money, but it can also affect your chances of being approved.
Although some mortgage brokerages have access to a few more lenders than others, for the most part, most mortgage brokerages all use the same twenty-plus mortgage lenders, which include some major banks, credit unions and non-banks.
If you are rate shopping or looking for the best mortgage product, you may consult a few brokerages and major banks directly. You may even approach credit unions, too.
In the end, you may end up getting the best rate and product, but you may also meet difficulties depending on your financial situation and how mortgage lenders and insurers view your application.
Here's what you need to know.
If you're applying through many different mortgage channels at the same time, you are at increased risk of your application getting sent multiple times to the same lender or insurer by different brokers or banks you've been 'shopping.' Applying this many times with the same lender through different channels can create confusion and ultimately lead to the decline of your mortgage application.
High-risk mortgage applications must get approved by both mortgage lenders and one of the three high-risk insurance companies. If a lender want to approve your application and the insurance company declines to insure it, your application still gets declined.
Although most high-ratio mortgage files that are approved by mortgage lenders get approved by one of the insurance companies, some applications will get declined by the insurers regardless of whether or not the lender wants to approve it.
For example, some borrowers don't have the best credit history, but their current credit score still falls within acceptable insurable parameters. They may have a history of delinquencies or a unique income situation that needs to be explained or rationalized by the lender to the insurer.
When applying, in addition to your credit score, income and down payment information, a lender heavily relies on broker or bank specialist comments about your file. In the case of having credit issues, the professional you use must tell a truthful story about why there are hiccups in your credit. Communication and writing skills are essential and should influence your choice about whom to work with for mortgage financing.
Sometimes, the 'story' is sufficient and acceptable to both the lender and the insurer, but other times it's not, and ultimately leads to a decline.
Therefore, if you apply with many different channels, the application process can become complicated because a new, reworded story gets sent to a new or the same lender but ultimately, reaches the same insurers, which creates unnecessary "red flags" and can evoke an automatic decline or jeopardize a previous approval.
Does this only apply to high-ratio mortgages and insurance companies?
Even if you don't need high ratio mortgage insurance because you have a down payment of 20 percent or more, you may still find yourself at an increased risk of the same fate if you shop many different mortgage brokerages at the same time.
All brokers write up their specific "notes" about the file and provide credit score, income, and down payment information in an application to lenders.
Regardless of whether or not a lender declines or approves your application, you may become compelled to still apply with other brokerages. If declined, you may want to try and get approved by making sure you "leave no stone unturned." If approved, you may still want to determine whether or not you can find a better rate or mortgage product.
Whatever the reason, if you continue to apply with different brokerages, you are at an increased risk of having your application sent to the same lender who initially declined it. Unfortunately, most brokerages are not in the habit of advising borrowers of lenders they have applied with, which often makes it impossible for new brokers to know which lender has already reviewed the application.
Therefore, to avoid experiencing a situation that can harm your chances of getting approved for mortgage financing or even reversing a previously favourable decision, it's imperative to work with people whom you trust and have thoroughly vetted for efficiency, reliability and tenure in the industry, instead of shopping around unnecessarily.
Also, if you must shop around and shop multiple brokerages at the same time, be sure to ask your previous mortgage brokerage which lenders have already reviewed your application.
The mortgage process can feel overwhelming and become confusing, which is all the more reason mortgage brokers and banking specialists should lift the burden of finding the right mortgage off your shoulders and work with you to increase your chances of finding the best rate and mortgage product.
Have mortgage questions?
Feel free to WhatsApp me at (647) 773-4849 or visit www.coluccimortgages.com
Sarah A. Colucci, Sr. Mortgage Agent Lic. M14000929, Mortgage Edge Broker 10680
By: Sarah Colucci