Getting a mortgage can be an exciting yet stressful time. As a homebuyer you want to secure the best possible loan terms to fit your needs and budget. That’s why choosing the right loan officer is crucial. While most mortgage lenders are ethical professionals who want to find you the perfect loan, unfortunately there are some bad apples out there you’ll want to avoid.
Keep reading to learn the top 5 red flags that indicate your loan officer may be shady or predatory. Being aware of these warning signs can help you avoid getting stuck with a terrible loan that doesn’t fit your financial situation.
1. If the Rate Sounds Too Good to Be True…
If a loan officer quotes you an incredibly low interest rate or makes other tempting promises about the loan, use caution. Unreasonably good deals are often a scam designed to hook people in Once you apply and start the paperwork, you may find the actual rates and terms are much worse than originally advertised
Shady loan officers may bait you in with a super low “teaser” rate that’s only good for the first few months. Or they might promise no closing costs when in reality there are hefty fees attached. Be wary if something sounds too good to be true – make sure to verify all details in writing first. Don’t get lured in by a deal that seems “once in a lifetime.”
2. Your Voicemails and E-mails Start to Go Unanswered
Responsible loan officers are available to answer your questions and concerns that come up throughout the lending process. At first, your loan officer may seem really attentive and helpful. But then once you’ve signed the paperwork and they have your business, it suddenly becomes impossible to get a hold of them.
Unreturned phone calls and e-mails are a huge red flag. If basic communication stops soon after you sign, it likely means they were just telling you what you wanted to hear initially to make the sale. But now that the deal is done they no longer care. You want a loan officer who is responsive from start to finish.
3. Fancy Being Yelled At?
Verbally abusive behavior is never okay. If a loan officer raises their voice, insults you, or engages in other aggressive tactics, run away fast. One of the first signs of a predatory lender is bullying and intimidation.
They may make you feel stupid for asking simple questions or not understanding complex financial terms. Or angrily pressure you to sign documents before reading them thoroughly. A good loan officer should be patient and take time to explain things – not put you down or rush you through the process.
4. You’ve Been Lied To
Mortgage documents contain lots of complicated terminology. But verbal discussions with your loan officer should explain all the key points in simple language you understand.
Pay attention to any inconsistencies between what was said verbally versus the written loan details. For example, if the interest rate or monthly payments don’t match what you discussed, that’s a major red flag. Reputable loan officers are always honest and upfront. Deception is a sign of a shady, predatory lender.
5. Constant Delays and Lost Paperwork
The mortgage approval process does take some time. But excessive delays or constantly “lost” paperwork is a bad sign. Many predatory lenders use stalling tactics to drag out the process and keep collecting application fees and other payments from you.
Or they may pretend not to receive documents you’ve sent multiple times, asking you to re-send things over and over. This enables them to rack up more fees from you under the guise of “processing” your application. Don’t tolerate excessive delays or bureaucracy.
How to Avoid Predatory Lenders
Now you know what red flags to watch for when choosing a mortgage loan officer. Here are some pro tips to avoid predatory lenders and find a reputable professional you can trust:
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Shop around – Compare interest rates, fees, and loan terms from multiple lenders before choosing. This gives you a sense of what’s standard in the market. An offer that’s much higher or lower than competitors is cause for caution.
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Verify credentials – Research lenders on sites like the Better Business Bureau and Consumer Financial Protection Bureau. Check they are licensed to operate in your state. Their reputation and reviews from past clients offer insight.
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Read everything carefully – Don’t skim forms or sign anything you don’t fully understand. Ask for explanations of complex sections. Get all verbal promises in writing.
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Bring a trusted advisor – Having a real estate agent, lawyer, or financial expert with you prevents lenders from manipulating or overwhelming you. They can also review paperwork to catch sketchy terms.
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Take your time – Signing mortgage paperwork is a huge financial commitment. Don’t let anyone pressure or rush you into it. Predatory lenders often hurry borrowers along before they spot red flags.
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Follow your gut – If something feels “off” about a lender, don’t ignore that instinct just because the numbers look good on paper. Shady loan officers can make terrible deals appear amazing at first glance. But your gut knows better.
Getting the right mortgage is key to buying your dream home. Make sure you choose a trustworthy, ethical loan officer to guide you – not a predatory lender who cares only about making a quick buck by scamming you. Watch for these red flags, and you’ll avoid getting stuck with a mortgage disaster. Happy house hunting!
The Reviews Are Really Bad
Word of mouth remains one of the most powerful marketing tools in the digital age. It’s much easier for consumers to spread their opinions of businesses these days; after all, a business’s reputation can be elevated or downgraded with a few thumb strokes on a smartphone. When you’re looking for a lender during the home purchase process, it’s good to check reviews before making your choice.
As you read reviews, keep in mind that one or two bad experiences out of hundreds should not be the focus. Instead, try to notice patterns for a more objective measure of the service quality you can expect. For example, if several reviewers note that it was hard to communicate with their MLO, that could be a red flag indicating disorganization or disinterest from the mortgage loan officer who handled the file. On the other hand, you also want to be wary of a slew of 5-star ratings that suggest perfect performance. Although that’s an ideal situation, it’s not often that 100% of clients are happy 100% of the time.
Not Answering the Customer’s Questions
Customer service is one of the top duties of a mortgage loan officer. They act as a guide for homebuyers going through the financing stage of homeownership, and they’re responsible for fielding tough questions clients have about a process that isn’t always so straightforward. So, if you come across an MLO who is evasive about your questions, that’s a good sign to take your business elsewhere.
If the MLO you are working with can’t seem to ever give you a clear answer no matter what questions you ask, or if they fail to take the time to make sure you understand something more complex, that signals someone who is disinterested in providing you the service you deserve.
What Does a Loan Officer Do & How to Spot a Bad One
FAQ
What are red flags in the loan process?
How do you know if a loan officer is legit?
Are loan officers good or bad?
Though most loan officers are good at what they do, unfortunately, there are some bad ones. And though you cannot always tell in advance whether they’re going to be good or bad, here are some signs of a bad loan officer – one who is not fully working on your behalf. There’s no excuse for a loan officer to lie to you.
How do loan officers cover up their mistakes?
Loan officers claiming that the guidelines changed is probably the most common “cover-up” that is communicated by loan officers that lie. Here are a couple of recent examples of how these loan officers try to cover up their mistakes through their lies. We were pre-qualified for a loan with 10% down. We made an offer on a house.
Can a loan officer lie about a job loss?
This is misinformation that could be the result of a conscious decision by the lender, or ignorance by the loan officer. This one only qualifies as a lie if the loan officer knows better, and is trying to cover up the decision that their employer has made regarding underwriting these scenarios. I lost my home because of a job loss in 2007.
What happens if a borrower doesn’t sign a home loan?
The borrower agrees and the contractor begins the work. Later, the borrower is asked to sign papers under pressure from the lender. If the borrower tries to ask questions, the contractor threatens to stop work on the house if the borrower doesn’t sign the loan, so of course, the borrower signs the loan.