Signs It's Time For A New Mortgage Lender
When you are ready to buy a house, many steps in the buying process can be confusing or intimidating. While house hunting can be fun, dealing with loan applications usually is not.
As a home buyer, you must find a lender that offers good terms on your home loan and best meets your needs. The internet has made it easy to request mortgage quotes, which can lead to being bombarded with sales pitches from loan officers.
While these sales pitches will appear attractive, things aren’t always as good as they seem. If you decide to work with one of these loan officers, you may discover you’ve chosen badly, which could become a costly mistake.
We reveal the 8 signs of a bad loan officer that you should be aware of, but first, what is a loan officer?
What Does a Mortgage Loan Officer Do?
When finding a lender, your choices will stay with you until you repay the loan or refinance. Making a bad choice when choosing your mortgage can be expensive.
The loan officer or originator (LO for short) will guide you through the loan process and the financing of your home purchase. The loan officer is going to represent the lender but should also be looking out for your interests. Their job requires that they have extensive knowledge of available mortgages based on credit scores to help you get the loan you need.
However, there can be bad ones since the loan officer works for the lender or mortgage broker and is likely partly paid in commission.
A bad loan originator might try to convince you to agree to a shady loan that is better for them than it is for you. They might be slow to act, delaying your home purchase. They could dodge questions or lie to you. Worse still, they might even encourage you to lie during your mortgage application and commit fraud.
Before you choose your loan officer, there are some things you should know to avoid making a costly or stressful mistake. Look for the following signs of a bad loan officer and get yourself a different lender if any of the following are true:
Bad Customer Reviews
Businesses love customer feedback; it shows their credibility and gives buyers confidence. Customers can also leave negative feedback, revealing a bad LO and lender.
Checking feedback on independent websites will help you better understand how the lender and LO serve their clients. If you find large numbers of customer reviews, some negative feedback is inevitable. Don’t be overly influenced by one or two bad reviews for a company with an otherwise good record.
But if you do find a large proportion of bad customer ratings, you could be in trouble with the LO. Even if the reviews aren’t too bad, they will give you useful information about what can be expected if you choose the same lender.
Avoiding Difficult Questions
It’s the job of the LO to guide you through the mortgage process. You’ll likely have many questions about the loan. If they seem evasive or ignore your questions, perhaps they’re not the best person to help you with your loan.
The LO should be ready to provide further details and answer your queries. While they might be keen to highlight the positive terms of the loan, they shouldn’t withhold the less attractive details.
If your LO isn’t responding as you’d like from the outset, you should look elsewhere.
Over Promising – Too Good To Be True Interest Rate
When you are looking for a home loan, you want to find the best deal that will save you money. While you might be attracted to a good deal, is it too good to be true?
If a LO is promising you better terms than other lenders, they might not be telling you the whole truth. Some predatory lenders offer great deals on a mortgage, but take the title and rent the home back to you. While they might let you buy it back later on, it won’t be the great deal you expected.
The lender might appear to offer a great interest rate compared to other lenders. But after you start the loan application, you might find out the attractive interest rate is only for a short time, perhaps just a month. Then after this introductory period, you will pay substantially more interest than other loans.
Some LOs will promote mortgages that cost you far more than it first appears. Before signing a contract, ensure you fully understand the terms and how it affects the cost of the home loan.
Unanswered Calls and Emails
While the LO might not be immediately available to answer your calls or reply to your emails, they should respond to you without undue delay. If you find you have to leave multiple messages or emails to get a response, they won’t be paying much attention to your application either.
Bill Gassett, a home sales expert and the owner of Maximum Real Estate Exposure, shared excellent tips on vetting mortgage brokers.
“Getting involved with a terrible LO can be a truly awful experience. Whether you are representing a buyer or a seller, it can be a nightmare for all parties involved. The worst offenders have two themes in common – they have terrible communication skills, and they overpromise and underdeliver.
As an agent representing many home sellers, it is a terrible feeling when you are looking for answers to a specific status on a loan and the LO is nowhere to be found. Sometimes, they will not answer simple questions for over 24-48 hours, which is unacceptable in this work line. It reflects poorly on the buyer’s agent and the listing agent. Trying to explain to your clients that you don’t have answers makes everyone look bad.
Like any other professional, it is crucial to vet them properly. If you don’t, you could be stressed out and have an awful real estate transaction.
The worst offense is when a shady lender provides a bogus preapproval letter. Imagine yourself telling the seller they have nothing to worry about because the buyer has been vetted when, in actuality, they haven’t. It creates a significant level of distrust for all parties.”
Unnecessary and Constant Delays
Problems can get in the way of closing with any mortgage application. However, you could experience this situation repeatedly if you pick the wrong LO.
You could find that your LO takes too long to respond to your messages, or they fail to tell you about an issue that could delay the application process. These problems can arise if the LO is overwhelmed with work or simply disorganized. But, whatever the cause, delays in the process will be very stressful.
Applying Pressure
Before signing you need to be sure the home loan is the right one for you. If the LO is pushing you to a decision, it could be a sign of bad things.
Some unscrupulous lenders hide things in the small print that they don’t want buyers to read. Pressuring the borrower to sign the contract means they may not learn about these terms until it’s too late.
The LO should give the borrower enough time to read the contract terms and ask any questions before they sign. If they don’t, the borrower may discover they have more fees to pay than expected.
Before signing the contract the borrower should understand and be happy with the monthly payment, interest rate, fees, and other terms. If it seems like there isn’t time to fully understand the details of the mortgage, it could be wise to not sign the contract.
Errors in the Terms and Conditions
The terms and conditions of the loan should clearly state the details that have been agreed. If the contract says something different from what the LO told you, or if there are two mismatched figures in the terms, don’t sign.
Perhaps you were told one of the fees would cost $300 but the terms state $500, or the APR is listed as two different amounts in the document. Any issues you discover need to be corrected before you sign the contract.
It might be the case that the originator made a genuine mistake, but it could be intentional. If it seems like the LO was trying to deceive you, walking away from the loan might be your best option.
Even if you don’t find any issues with the paperwork, it isn’t a bad idea to strike out any empty sections and pages. This prevents terms from being added after you’ve signed the document by an unscrupulous LO.
Being Asked to Lie
If the LO suggests inflating your income on the application or leaving out certain information, it is a problem. Lying on your application is fraud, and committing mortgage fraud could land you in jail. If caught lying to get a loan, the felony could mean a financial penalty or jail time if serious enough.
Even if you get away with the lie and get the loan, it could still catch up with you later. If you misrepresent your income to qualify for a larger loan, you will likely default and enter foreclosure proceedings.
If your LO suggests you misrepresent yourself on the application, they aren’t looking out for your best interests. If you find yourself in this situation, you should end the application there.
Summing Up 8 Warning Signs That Loan Officer You Chose Is Not The Right One
While you should be able to trust your LO to guide you through the process of applying for a mortgage, real life doesn’t always work out as planned. When you sign a loan agreement you should be aware of any red flags to help you avoid costly problems.
Even if you think you are too far into the application process to change your mind, you shouldn’t continue if you aren’t treated right by the LO.
In your journey to secure the perfect mortgage, the importance of a competent LO cannot be overstated. However, identifying and avoiding a bad LO is just one part of the equation. Equally crucial is recognizing the signs of a bad real estate agent. Together, these guides will help you navigate the complex world of real estate with confidence and ease.
Signs of a Bad Loan Officer
About the author: This article was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generate new leads from his website.
We provide award-winning customer service to clients who need to purchase a home or refinance an existing mortgage.
