Should you work with your current lender or a new lender when you get a new mortgage? What are the advantages and disadvantages of each option?

By Michael Jensen, Mortgage and Finance Guru

Edited by Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Updated October 20, 2020

There is typically no inherent benefit to working with your existing lender when you get a new mortgage whether it is for a home purchase loan or a refinance. In short, each time you apply for a mortgage, the process starts over with the lender.

Regardless of if you are a current customer, when you submit your loan application the lender reviews your personal and financial information including your credit score, debt-to-income ratio, employment history and other factors. If you meet the lender's qualification requirements, you should be approved for the mortgage. If you do not meet the lender's guidelines, your application is declined, even if you are an existing customer of the lender.

In some cases borrowers who have an issue or challenge with their application, such as a derogatory credit event, may benefit from having an existing, personal relationship with their lender.  In this scenario the lender may be able to give the borrower the extra push they need to qualify.  The extent of the benefit varies based on the nature of the relationship, the lender and the loan officer processing your mortgage so the advantage depends your personal situation.

For borrowers who have clean loan applications with minimal issues that do no need additional help to get approved, there is usually no advantage or disadvantage to getting a new mortgage with your existing lender.  In this case, just like the mortgage process starts over for the lender when you apply for a new loan, it should also start over for you, the borrower.

You should take the opportunity to shop multiple lenders to find the best loan terms including the lowest mortgage rate and closing costs. You can get a mortgage quote from your current lender but you should also compare proposals from at least four additional lenders.

Use our personalized mortgage quote form to compare no-obligation proposals from up to five lenders. Our easy-to-use quote form requires minimal information and does not impact your credit. 

After you receive the proposals, negotiate with the lenders to see if they will improve their terms. For example, if one lender is quoting a lower mortgage rate and another lender is offering lower closing costs, see if the lenders are willing to match each other. The lenders may say no, but there is absolutely no downside to negotiating your mortgage.

In closing, most people shop multiple dealerships to find the best price when they buy a car and the same logic applies to shopping for a mortgage.  When you shop for a car you may start with your current dealership but you should also shop around to make sure you do not overpay -- the same process holds true with mortgage lenders. 

So start with your current lender but contact several others as well.  This approach can save you money or you may be able to find a lender that offers a loan program that better meets your needs or that applies more flexible qualification guidelines.

At the end of the process, your goal is to find the mortgage that is right for you with the most favorable loan terms. That may be with your current lender or a new one but you are doing yourself a disservice -- and potentially wasting thousands of dollars -- if you do not compare lenders.

The table below shows leading mortgage lenders in your area.  We recommend that you contact multiple lenders to find the loan that best meets your needs. 

Sources

“Comparing loan offers.”  CFPB.  Consumer Financial Protection Bureau, 2017.  Web.