In short, you can cancel, or rescind, your mortgage and change lenders for any reason -- including if the lender requests too much information -- any time before you sign loan documents for a purchase mortgage. For a refinance, you can cancel your loan up to three business days after you sign loan documents.
Even if you have been pre-approved by a lender or submitted your loan application you are under no obligation to continue working with that lender. Additionally, depending on where you are in the mortgage process, you may be out certain non-refundable upfront costs but a lender cannot charge a penalty or any other fee if you cancel your loan.
To address your point about why your lender is requesting so much information, it is difficult for me to answer this question without knowing your specific circumstances but lenders are required to verify your employment as well as the source of funds for your down payment and reserves, if applicable. The lender wants to make sure that the funds you use for your down payment come from your personal savings or investments and are not actually a loan.
Review our Mortgage Document Checklist to understand the information lenders typically request
In addition to the standard information lenders ask for when you submit your mortgage application, you may be required to provide additional documents after your application goes through the lender's underwriting process, which involves a detailed review of your personal and financial profile. For example, the underwriter may require additional tax documents, account statements or more detailed information on your investment holdings. Depending on the lender's guidelines, the specific underwriter and the follow-up requests, your may find the process intrusive.
If you are not satisfied with the the level of service provided by your current lender or you think they are overreaching, you can always cancel your mortgage and find a different lender. We should highlight, however, that there is no guarantee that your new lender does not request the same information as your old lender.
If you are considering changing lenders we recommend that you contact multiple lenders in the table below to confirm the information they require. Be sure to explain your situation and concerns regarding the documents your prior lender requested. This should help eliminate potential confusion and avoid a repeat of your current situation. Shopping multiple lenders may also enable you to find better mortgage terms.
An important point to keep in mind if decide to switch lenders is to make sure that your new lender can process your mortgage fast enough to meet the closing timetable. You do not want to delay your home purchase process because you changed lenders. And to reiterate a point we made above, you should be aware that you may be out certain one-time fees if you cancel your loan.
Also, if you already have an appraisal report, the report should be transferable to your new lender, which can save you time and money. When you change lenders, send the report to your new lender so that its underwriting staff can confirm that they accept it.
Because the appraisal report was ordered by, and issued in the name of, your original lender, the appraiser likely needs to re-issue the report in the name of your new lender. Most appraisers charge a reduced fee ($100 - $200) to re-issue an appraisal report so the cost is lower.
Ultimately if you find a lender that you prefer that potentially offers you more flexible qualification guidelines and more attractive loan terms, then it may make sense to switch lenders but it is important to weigh all the considerations.
“How long do I have to rescind? When does the right of rescission start?” CFPB. Consumer Financial Protection Bureau, September 25 2017. Web.« Return to Q&A Home About the author