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Should You Work With Current Lender Get New Mortgage?

Should you work with your current lender when you get a new mortgage? We have been with our current lender for over a decade and are looking to get a mortgage to buy a new home. We would like to understand if the advantages and disadvantages of using our existing lender for the mortgage.

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

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 or to 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 of a lender, when you apply for a mortgage, the lender reviews your mortgage qualifications at that time, including your credit score, debt-to-income ratio, employment history and other factors. If you meet the lender's qualification guidelines, you should be approved for the mortgage. If you do not meet the lender's qualification guidelines, you will not be approved for the mortgage, even if you are an existing customer of the lender.

In some cases borrowers who have an issue with their loan application, such as a derogatory credit event, may benefit from having an existing, personal relationship with the lender as the lender may be able to give the borrower the extra push they need to qualify. In this scenario, the benefit depends on the nature of the relationship, the lender and the loan officer processing your mortgage so it really varies from lender to lender. For borrowers who have clean loan applications with minimal issues, there is usually no advantage (or disadvantage) to getting a new mortgage with your existing lender.

Just like the mortgage process starts over for the lender when you apply for a new mortgage, it should also start over for the borrower. You should take the opportunity to shop multiple lenders to find the one that offers the best terms including the lowest mortgage rate and closing costs. You can get a mortgage quote from your current lender but you should also contact three or four additional lenders to compare multiple proposals. After you receive the proposals from the lenders you can negotiate with them to see if they can improve the loan terms they are offering. For example, if one lender is offering a lower mortgage rate and another lender is offering lower closing costs, see if the lenders are willing to match each other's terms. The lenders may say no, but there is absolutely no downside to negotiating more favorable mortgage terms.

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. You may also be able to find a new lender that offers a mortgage program that better meets your needs or that applies more flexible borrower qualification requirements. At the end of the process, your goal is to find the mortgage that is right for you with the best loan terms. That may be with your current lender or it may be with a new lender but you are doing yourself a disservice -- and potentially wasting thousands of dollars -- if you do not compare lenders.

You can compare lenders in your area by clicking MORTGAGE RATES As outlined above, we advise you to contact at least four lenders as as qualification guidelines vary. Plus, shopping lenders is the best way to save money on your mortgage. You can also use our Free Personalized Mortgage Quote function to receive no obligation mortgage quotes from up to four lenders.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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