You may be surprised to receive a letter in the mail informing you that your mortgage has been sold to another lender. And although this is a common occurrence, the process is often misunderstood, leaving many homeowners with unanswered questions.
Your lender can sell your VA loan after months of working with you or before you even make your first payment. Whatever your situation, there is no need to worry. Millions of Americans’ mortgages are bought and sold each year, and the process proceeds without issue the majority of the time.
Still, there are a few things you should know.
What Happens When a Mortgage is Sold?
When a bank or lender sells a mortgage to another lender, the entire agreement changes hands, but the terms of that agreement must remain the same.
In fact, it’s illegal for a lender to purchase a mortgage and change any of the following terms:
- Loan balance
- Interest rate
- Loan term (i.e. 30-year vs. 15-year)
- PMI or other financing fees built into your monthly payment
You shouldn’t expect any change in the amount you’re paying.
Here’s what can change:
- Who or where you send your mortgage payments
- How you pay your mortgage
- When your payments are due each month
The new lender who purchased your mortgage must provide written notification within 30 days of the transaction. This notice will often be separate from the letter you received from your original lender and will include contact information or steps to set up your payments.
Mortgage Sold Before First Payment
Some lenders might sell your loan before you make your first payment. While it’s not always the preferred outcome, you can rest assured the mortgage you closed on will remain the same no matter what institution services your loan.
There are actually some advantages to having your VA loan sold. You may be better served by your new loan servicer than you would be if your original lender retained the loan. Many lenders that purchase mortgages in the secondary market specialize in loan servicing after closing. In addition, your new lender might be better prepared to provide customer service for the life of your loan.
Some banks, credit unions and lenders specialize in guiding homebuyers through the transition process, tackling any unexpected hiccups on the way.
Does it Matter Who Services Your Mortgage?
Not necessarily. Many lenders have expertise in originating mortgages but not servicing them. Other institutions are better equipped to service VA loans and offer customer service for the long haul.
The key thing is your loan terms cannot change. From a day-to-day perspective, this is mostly a matter of where you send your mortgage payment each month.
Why Do Home Loan Lenders Sell Mortgages?
Lenders often sell mortgages in bulk to generate short-term revenue, allowing them to continue financing home loans for new buyers. By selling a mortgage on the secondary mortgage market, the lender no longer has to wait until the loan is fully paid off to recoup their initial investment.
Why Does My Mortgage Keep Getting Sold?
Lenders often sell mortgages in bulk to generate revenue, allowing them to continue financing home loans for new buyers. By selling a mortgage on the secondary mortgage market, the lender no longer has to wait until the loan is fully paid off to recoup their initial investment.
Many lenders wouldn’t be able to fund new mortgages without the proceeds from these sales.
What to Do When Your VA Mortgage is Sold
If you’ve received notice from your current lender that your mortgage has been sold, keep an eye out for a letter from your new loan servicer. Your new lender must notify you that they’ve purchased your mortgage and give instructions on how and when to begin making your mortgage payments.
Once your new servicer picks up your mortgage, make sure that payments with the old lender are stopped.
If you have any questions or issues during the transition, contact either your old or new lender. Both companies should be able to help.