Is Applying with Multiple Lenders a Good Idea When Buying Property in NYC?

Nick at Hauseit (www.hauseit.com) explains why it’s a very good idea to apply with more than one lender when buying property in NYC.

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The first reason for applying with more than one lender is timing. Demand for mortgages and the demand for refinancing does vary based on prevailing level of interest rates as well as what type of rates the lender you're considering has been offering over the past few weeks and months. If that lender is overloaded with applications because they say their rate has been super competitive, well that means that your actual commitment and underwriting process may take longer than usual. It could take perhaps four weeks and you never know; it could potentially take longer.

So, it's possible that there may be a mismatch between the mortgage commitment deadline or timeline in the contract and what your lender is able to mobilize on and ultimately there's never any guarantee that the seller will agree to extend the commitment deadline for your particular transaction.

So if you apply with two lenders, of course then you'll basically have two options and hopefully one of those lenders will be able to meet the commitment letter timeline in your contract. The second reason why applying with more than one lender is a good idea, is because it will minimize the risk of just being randomly rejected.

Of course, if you get denied by one lender technically there's nothing stopping you from applying with a second lender but of course you still have that mortgage commitment timeline in your contract and it's going to be next to impossible having waited for your first lender only to receive a denial. You'll invariably have pushed beyond the typical 20 to 45 day deadline in your mortgage contingency in the contract.

Another reason why applying with more than one lender is a good idea, is because it allows you to have more than one appraisal and as we know banks typically will only lend based on the appraised value. So if the appraiser uses bad comps and you randomly get a low appraisal, well that means that your loan size is going to be smaller and that might be a problem for you depending on your financials. So, if you apply with two lenders you have two complete standalone independent appraisals going for you.

Another reason why applying with more than one lender is a good idea, is if you are falling into what we would call like a special situation. A special situation could be, say for example that you're self-employed. Banks have different guidelines and varying guidelines for self-employed individuals.

Other lenders may have a certain trigger if you know your income has gone up or down by a certain percentage. It could potentially cause a problem with the overall approval. So, you know if you are self-employed and maybe the math is tight, you really should consider applying with two lenders if you want to make absolutely certain that you will close on the property you're in contract. On another so-called special situation, would be if you're purchasing an investment property and the reason why this is a special situation is because each lender will have different guidelines for how they calculate your debt-to-income ratio.

The obvious downside of applying with more than one lender is cost. You certainly will have an application fee for each lender, typically $750 to $1,000 and also you'll have to pay for the appraisal, usually up front and that's another $750 or so. So, it will ultimately cost you a few thousand bucks most likely to apply with a second lender but the big picture must always be considered if this purchase is really important for you. If it's a really special property or if your retirement and lifestyle planning necessitates, the purchase of this property for an investment or whatnot, you really do need to.
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https://www.hauseit.com

Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Est 2014.

Hauseit Group LLC, Licensed Real Estate Corporation
Tel: (888) 494-8258 | https://www.hauseit.com
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