Knowing who to use for your mortgage can be downright intimidating. Many families end up regretting who they choose to lead them through their homebuying journey. Especially as a first-time homebuyer, you will not know which red flags to look out for when choosing your lender.

mortgage lender looking at closing turn times

Empty Promises


Low Interest Rates

Any lender that promises you the lowest rate in town is likely trying to stop you from shopping around. While they may have a competitive interest rate, they are still trying to make a profit. Often times they can offset the cost of giving you a lower rate by offering poor service or charging you discount points.

Promising The Rate

Another way in which lenders will trick you with a rate is by promising you today’s rate. Rates fluctuate daily, and if you haven’t yet locked your loan, you will be subject to those changes. Make sure you use a lender that is focused on educating you, not just closing you.

Unrealistic Closing

Lenders will also promise unrealistic closing timeframes to seem competitive. While many lenders can close fast, it’s essential to close as quickly as promised. If you take too long to complete your loan, you can lose your hard-earned money and dream home as you will breach the contract.

Talk to your lender about their average turn times and what challenges they foresee with your loan if any. This must be talked about before your realtor® fills out your offer to purchase contract. If this step is neglected, you could set yourself up for a breach of contract that is out of your control.

Doesn’t Show You Multiple Options

Another red flag that you might be working with a lazy or unprofessional mortgage loan officer is that you aren’t shown multiple options. Regardless of if it’s a bank, direct lender, or mortgage broker, all lenders have options that you can pick from. Even if you only qualify for one program, the way the costs are structured can have an enormous impact on the success of your mortgage.

If a lender doesn’t show you different options and provide advice based on your goals, then it’s time to find a new loan officer.

mortgage lender evaluating client's options

Doesn’t Ask About Your Entire Financial Picture

You need to use a mortgage lender that is concerned with your whole financial picture. While a mortgage may play a significant role in that picture, your mortgage must match your long-term financial plan.

For example, if you have enough assets to put 20% down on a home and are ready to buy, your lender’s job is to find out where those assets currently live and what you are doing with them. Suppose you have to liquidate stock to put the full 20% down and get a higher rate of return than it would cost to put less than 20% down. In that case, the mortgage lender must advise you on alternative solutions. Lazy lenders won’t bother to ask those questions and provide any kind of solution.

Zero Communication

The most common red flag you will come across is poor zero communication, which can negatively affect your home buying process. It can be intimidating to be left in the dark during the most important transaction of your life. You need a mortgage advisor who proactively communicates and isn’t afraid to call you directly if something goes wrong.

Any mortgage lender with poor communication or follow-up during the sales part of the process is a red flag and indicates what’s to come.

Pre-approval leads to client getting keys

Issues A Weak Pre-Approval

Weak pre-approvals are another typical red flag in the mortgage industry. Since many first-time homebuyers aren’t educated on the process, lazy and novice lenders will opt for quick pre-qualifications over pre-approvals.

Unfortunately, many consumers/realtors® don’t notice this until it’s too late and is already under contract on a home. The process of getting pre-approved needs to include:

  • Submitting an extensive amount of documentation
  • A credit pull
  • A loan consultation that talks about your goals, dreams, and entire financial picture.
  • Possible submission to underwriting ahead of time for any tricky scenarios

Suppose you are getting quick or no credit pull pre-approvals. In that case, you are setting yourself up for failure, and the lender is not doing all the work needed to accurately pre-approve you.

Buys Your Information

Once you pull your credit to get pre-approved, you will likely receive a few phone calls from different lenders trying to get you to shop around. They buy your information and assume that you are already in the “buying stage” of your journey since you were pulling your credit. 

They will offer things that, without your pre-approval completed, they have no way of genuinely offering, such as:

  • Appraisal waivers
  • Low-interest rates
  • Fast closings

These lenders can’t build their own business of their reputation and rely on buying your information and bait and switch tactics to hook you in.

Bait & Switch

Similar to the phone call you get when you get your credit pulled, you may receive mailers during and after the process of trying to get your business. These also use bait and switch tactics to try and lure you in. They bank on the fact that you will not want to go anywhere else once you are deep enough into the process. Any lender that hasn’t built their local reputation and has to rely on poor marketing techniques to get their business is a red flag.

If you have questions about buying or refinancing a home, or the lender you are using, click here to schedule time to talk with our team. We can go over your specific situation and how to know if the lender you’re using has your best interests at heart.

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