Rebecca Richardson - Mortgage Consultant
Will You Have the Same Lender Throughout Your Home Buying Journey? Maybe Not...
If you’ve gotten a mortgage before, or this is your first time buying a house, you may have heard that you can start with one lender and wind up actually choosing a different one.
But what does it mean to change lenders and why does it matter?
It’s important to understand that when it comes to mortgages, there are two ways you can work with a lender.
There’s the origination side which means that the lender is responsible for collecting your information, structuring your loan, and getting that loan closed.
The second part of that is servicing which means after closing, the lender will help with processing your payments, managing your escrow account for taxes and insurance, collecting those fees, and then also paying the amount to the right parties.
Some companies do both. A lot of banks will do both and then there are some companies that primarily focus on origination and then there are other companies that primarily focus on servicing.
And there can be some predictable concerns around that transition from origination to servicing.
Yes, your loan can be sold at any time but typically if it is sold after closing, you’re going to be with that company for some time.
Common questions include -
What happens to my loan? Can my terms change?
No, your terms can not change. The note, which is essentially a contract explaining the terms of your mortgage, is a signed contract. It finalizes your rate and loan term.
So your payment will not change in that sense.
What happens with my escrow account?
Just like when servicing rights are transferred - for example, if a new company is going to start processing your payments, your escrow account also follows that account.
So now that we have the concerns out of the way, why do lenders do this?
The important thing to remember is when a lender is closing your loan, when they are lending you that money, they have a finite amount of money to use.
Well, at a certain point that money will run out, so what has to happen is your mortgage is transferred to another company that purchases that loan and reimburses the lender for your loan amount.
So what that essentially does is keep the flow of money moving throughout the industry.
But as a borrower, how does it benefit you?
First off, you shouldn’t be worried if your loan is going to be transferred to a different servicer.
The main reason is it allows lenders on the front end in that kind of origination channel to be very competitive. This means they can sell loans to different servicers who may be able to offer lower rates or more flexible guidelines.
This gives you the opportunity to get a loan with better terms and an even easier process because of more flexible guidelines.
So if you have any concerns about your loan being transferred for servicing, talk to your loan officer so they can address those questions and bring you the comfort that you need to make your next decision.
My team can also help you over a consultation call/ You can contact us by emailing (email@example.com) or finding me on Instagram (@the.mortgage.mentor).