Shopping your mortgage? You could be killing your approval.
I am all for getting the "best rate" when considering buying a home or refinancing your mortgage. Just don't kill your mortgage approval by assuming that having two or three mortgage professionals working on your file is the best answer. This is the biggest liability of your life. A $400,000 loan can have massive pitfalls if managed wrong and can send you into bankrutcy, foreclosure or massive debt. Believe me...I have personal experience.
Is it ok to shop with two different brokers or banks? Sometimes.
First I recommend you INTERVIEW a few brokers (see my blog post on "10 Questions You Should be Asking Your Potential Mortgage Broker") to see if you have a good working fit. Nothing worse than Broker A is selling you the most amazing rate and snake oil, yet never picks up their phone or returns calls. During the stressful time of financing, you WILL have questions and that feeling of uncertainty when a broker doesn't call you back can be unnerving. Look at testimonials. If a broker doesn't have any, you should be asking why.
Once you pick a broker, stick with them. A good broker, with years of experience will do a good job and be a good communicator. Inexperienced brokers can lead to less lender product recommendations, more paperwork, delayed responses and closings, unnecessary fees and potentially huge penalities in the future. I am all for new brokers, just make sure they have a "mentor" looking over their file and get in touch with that mentor. Use your instincts.
Trying to outsmart brokers isn't a good idea. It's a small community we work in. We WILL find out! As an example, if I find out a client has been to another broker either through discussion or checking credit, I will want to know why they didn't proceed. If they have completed an application and credit check with someone else, but don't like the rate offered, I will want to discuss the file with the other broker and likely will not take that client unless there is a good reason. Frankly, the other broker might fire you too. Brokers don't appreciate having their time wasted. Applications and credit checks cost money and time. Good brokers are busy and only work with loyal clients. "It’s like hiring two house painters and putting them to work on different sides of the house where they can’t see each other. When they have each finished about half of their side, you introduce them and say, “Nice job fellas, now the one who gives me the lower price can finish it and get paid.”
If you have a Bank AND a Broker working on your new purchase and your file was submitted to the insurer (ie CMHC) differently; you risk losing that mortgage from BOTH of them. The insurer might flag your mortgage as potential fraud if there are significant discrepencies in how it was submitted. If your file was submitted to the same Lender twice...they may not work on either application, until a decision has been made by client.
Each time someone pulls your credit, it may reduce how much you can borrow and potentially get you declined period. Here is a story; fella got an approval with Broker A and his score was 620. He was suppose to close his loan in 4 weeks. Client, while withdrawing his RRSP funds from his bank, the bank said "we can do better rate". So he proceeded with that Bank application and was subsequently declined from Bank due to his credit. Unbeknownst to his broker with the approved loan, the file proceeds and 1 week before closing the approved lender repulls his credit (yes they do that) and it's now 580! Even though the lender initially approved the mortgage and you put your non-refundable $28,000 deposit down...the lender pulled the financing as they no longer qualified for the mortgage! Client loses deposit of $28,000. To keep "BEST RATES" in perspective. A $400,000 loan at 2.69% for a 5 year term and 25 year amortization is $1830 per month. A 2.65% is only $7 cheaper per month, $420 over 5 years. If you're worried about $420, you need to re-think your budget. A broker will save you well over $420 over the term of your mortgage either with advice, savings on appraisals, legal fees or other perks we have.
When people think of a mortgage, many immediately associate it with a bank. It's the new age folks! With licensed mortgage professionals, you have a far better chance of enjoying your experience, less stress, saving money, learning about your mortgage and knowing someone has your back. Our job as licensed mortgage professionals is to protect you. It's our fiduciary duty.
Be a smart shopper...
Kiki Berg, Mortgage Expert.