If you already have a mortgage and you want to refinance, it might seem like a good idea to just go with the same lender. This might have some value, depending on your exact circumstances, but you should know that new lender or not, you are starting over again. Even your current lender will require you to provide all new documentation including new paystubs, your most recent W-2s, and your most recent bank statements. They will also pull your credit again. Just because you used them for your current mortgage does not mean that everything is the same in your life. So much could have changed financially that could alter your ability to take on a new mortgage. If starting over is not enough incentive to shop around, here are few other reasons.
Not every lender offers the same types of programs. Take a look at your current financial situation – has anything changed since you took out your current mortgage? Maybe you changed jobs or your credit score dropped – no matter how things have changed, it means you will likely need a different loan program. Even if nothing changed, the chances of the same loan program being available from when you took out your current mortgage are slim to none. Mortgage programs change often as the regulations change. Individual lenders are constantly adapting to the changes and mixing up the offers they have for borrowers. Sticking with the original lender you used could limit your offerings causing you to miss out on a great program that would work best for your situation.
It is up to the discretion of each lender to determine what they are going to charge on your loan. One lender might have much higher charges than another. You will not know who offers what charges until you apply for the loan. If you apply for a mortgage with several lenders within a few week period, your credit score is only hit for one inquiry, so it is worth it to shop around. While lenders are restricted by the Qualified Mortgage Rules regarding how much they can charge you, they have some leniency as long as their charges are the same across the board for every borrower.
Better Chance of Approval
If you are not a straightforward borrower, meaning that you have many different issues with your loan application that are not like the standard borrower, then it pays to shop around with different lenders. For example, if you are self-employed, the loan programs greatly differ for you and each lender might have something different to offer. Lenders that keep the loans on their own books might have more flexible guidelines than a lender that sells everything into the secondary market and is regulated by the Qualified Mortgage Rules. In other cases, maybe your credit score is borderline or your debt ratio requires an exception but you have compensating factors to make up for that risk. Every lender looks at each situation differently, which makes it well worth it to see what other lenders have to offer.
Shopping around for a mortgage might seem like an inconvenience because of the amount of paperwork you have to fill out and the paperwork you have to provide the lender, but it can give you the best rate and program for the loan you need. Sticking with the original lender of your current loan is not always the only way to go. This is even true if you are taking advantage of the FHA Streamline program and refinancing your FHA loan into a lower rate. Every lender has different offerings, so take the time to shop around and get the best deal available to you!