Mortgage Broker Question (loan officer, approval, credit report, fees)

[sneezecake]

I have a financial and ethical dilemma - I am hoping some brokers can help me out with their insight here.

I am purchasing a new construction home. It will be closing in less than 30 days.

I have spoken with two brokers. Broker A is an independent broker and Broker B is the builder's broker/agent. My plan all along was to shop them against one another and go with the lowest rate.

Broker A has provided me with excellent service all along, Broker B has done nothing wrong, I just felt more comfortable confiding in Broker A due to the smaller conflict of interest/inherent bias.

We locked with Broker A 60 days prior to closing with a lender giving a good rate. The lock expires one day after our scheduled closing day (not too much breathing room, but I knew we should lock at that point because of the market, and lo and behold, rates were at least 0.5 higher than we locked for the next 3-4 weeks) It was the right call at the time.

Fast forward to last week - still with Broker A, and we're going through the application process. Our loan has been conditionally approved but they are still verifying a few things. We expect to hear back in the next day or two with final approval. While we have the ability to break this lock and re-lock with a different lender with Broker A, he asked that we make that decision by a certain deadline (4 weeks to closing) in order to give ample time for a new application if needed. We agreed.

Broker B contacted me today with a slightly better rate than we're locked and applied at with Broker A.

My questions are:

1) I feel like I have an ethical obligation to Broker A to close with him. He is unable to match, typically, the offer of Broker B due to builder incentive money...he always comes up about 0.125% short. Is this ethical obligation real or imagined, or is my only obligation to do what it takes to get me the best deal?

2) If my application with Broker A is approved, can I sit on that approval and apply through Broker B for his better rate to see if we get approved? (We have a few non-traditional issues like contractor status in employment for one of us, so the approval process is a little bit more convoluted) Or are we required to forfeit any loan approval, regardless of broker, in order to submit a new application on the same property?

3) How much does Broker A have to lose financially in real money if I were to hang him out to dry. Not saying I am doing that, but aside from the commission he would lose on my loan, what fees, etc, would he be forfeiting at my cause?

Thanks in advance for your help - I am happy to clarify any questions here.

[renriq02]

If you really want to go with Broker A then you will tell the builder that you want the SAME incentives but want to use another lender. If they say no, then tell them you're walking from the deal. They will tell you that you will 'lose' the deposit but they would rather you purchase the house. My last closing was like that, and borrower told the builder..there's NO WAY i'm using your lender. I like my lender, and I'll go buy another house if I have to.

You can always apply with Broker B or with any other lender. It is your right/choice to do so. You will not forfeit anything by doing so.

Broker A will lose time/work that he/she did on the loan.
Some processors still require the broker to pay them even if the loan didnt close.

BTW You will not get a full approval until you get the Certificate of Occupancy. If the home isn't built yet then you have a long way to go.

Originally Posted by sneezecake

1) I feel like I have an ethical obligation to Broker A to close with him. He is unable to match, typically, the offer of Broker B due to builder incentive money...he always comes up about 0.125% short. Is this ethical obligation real or imagined, or is my only obligation to do what it takes to get me the best deal?

2) If my application with Broker A is approved, can I sit on that approval and apply through Broker B for his better rate to see if we get approved? (We have a few non-traditional issues like contractor status in employment for one of us, so the approval process is a little bit more convoluted) Or are we required to forfeit any loan approval, regardless of broker, in order to submit a new application on the same property?

3) How much does Broker A have to lose financially in real money if I were to hang him out to dry. Not saying I am doing that, but aside from the commission he would lose on my loan, what fees, etc, would he be forfeiting at my cause?

Thanks in advance for your help - I am happy to clarify any questions here.

[48ways]

As a loan officer and someone who promotes transparency with mortgage transactions (I run beatmybroker.com), this is what I think:

1.)Go with the best offer. There's nothing wrong with taking the better deal. In a competitive situation, someone has to lose.

2.)You can apply with anyone, whenever. In the case of an FHA loan, a case number is assigned and if you switch lenders, the lender holding the case number must release it to the new lender.

3.)They lose time, they lose money (but money never earned). Hundreds of loans officers and other sales people work a lot to not get paid in the end. It's part of sales. The loan officer might be out the cost of a credit report, and possibly the cost of an appraisal if one has been completed and he/she cannot recover the cost from the client.

[NJ987654]

It's ok to shop... but loyalty and service are important also. If it's a significant monetary difference, go with broker B.... if it's small change in the grand scheme of things, stay with A.