Which Lender Should You Trust?

by | Apr 21, 2022

Today, we’ll go over which mortgage lenders you can trust. Many people aren’t sure which lender or broker to trust when they’re buying a house or even refinancing their home. In a simple manner, I will explain what you need to do, what questions to ask, and what documentation you might want to see before knowing that you are in good hands.

Trusting Mortgage Lenders 

Why do so many people struggle with this? The truth is it’s a sales job, and as a loan officer, I get paid when the deal closes. If I don’t close the deal, I do not get the money. It’s just like being a car salesman. Some people think they might not be getting the best deal because the loan broker is trying to juice out more commission from them, so it’s not uncommon to see people nervous when they’re shopping around for a loan broker. They don’t know whom to trust. Now, I’ll give you the essential things to check and look out for to help you decide whether to trust the lender or not. 

Regulations

There are regulations that guide mortgage lenders. Ever since 2008, when the mortgage bubble collapsed, there has been a vast restructuring in the country. The NMLS was designed to start keeping a much stricter set of rules and regulations. Hence, in terms of qualifying and having disciplinary actions against mortgage brokers who aren’t doing any honest practices, the law is really on your side. That being said, as soon as there’s a loophole and you can sneak things by a consumer, some deceptive loan officers out there try to take advantage of that. 

Again, the law is on your side. It doesn’t mean that there aren’t going to be dishonest loan brokers out there but know that you are backed up legally. As long as you know what to ask for at certain stages and how to compare lenders to each other, you will be confident that you’re getting a good deal.

Loan Estimate

When talking to a loan broker or direct lender, the first thing you should ask for is a loan estimate. 

A loan estimate is a standardized three-page document that goes over your interest rate, loan amount, and your down payment if you have any. You won’t have a down payment if you’re doing a refinance. A loan estimate also goes over your closing costs. 

I have explained everything you need to know about loan estimates in this article. I know that it’s possible to sneak things in, but you can easily catch this if you know how to read a loan estimate. Also, many big companies worth billions of dollars out there don’t give you a loan estimate. When they are talking to you at some point in the loan process, they have to, since they are required by the law to give you. However, when they are talking to you initially, and the sales guy is trying to convince you to say yes by coming over, locking your rate, and signing the initial documents, they might email you a one-page or two-page PDF with their logo on it. It looks pretty and official, but it’s not an actual loan estimate. 

So the first thing you’re going to want to do is to get an actual three-page loan estimate because that estimate is your best way to protect yourself against hidden fees. The loan estimate displays everything in writing. 

Your rates can change again before they are locked; however, they shouldn’t change too much. This is why it’s essential to know how a loan estimate works in detail. You should be able to get a three-page standard loan estimate from any lender or loan broker you’re talking to. If they can’t provide you with a standardized three-page loan estimate detailing the cost of the loan, my advice for you is that you should not work with them. They are either lazy or do not know how to create one. Either way, you can find a better loan officer to work with. 

False Figures

Another way to find out if there’s something fishy is in the way they’re pitching it. For instance, if they finally give you a loan estimate and say, “Hey, we know you need $620,000 but let us put it as $600,000. We’ll change the loan amount later.” That’s a little bit of a red flag. The reason is that certain things will change your rate and the pricing if your loan to value is higher than a certain percentage. Hence, if your portion of your loan against how much the house is worth according to the appraiser changes drastically, it’ll change your rate and closing costs. Let’s say instead of 70% loan to value; you’re at 80% loan to value; this will change the price of the loan, your rate, and your closing costs. 

Hence, be very astute if your loan amount looks off. Ask questions about it. If you make $80,000 and they put $81,000 on your loan estimate or your application, or if they tell you to change a number on your loan application, it would be very suspicious. If they’re trying to get the loan approved under basically a set of lies, then that’s a huge red flag not to trust that lender.

Sense of Urgency 

Another thing you should watch out for is a sense of urgency. Rates change daily, so there is a general sense of urgency in the market. However, if you have anybody pressuring you that you need to sign today to get the loan started, that’s a sign of someone who does not know how to deal with customers. As an individual, a home is usually the largest asset anyone has. You want someone who can talk to you with patience, respect you, and not be super pushy.  

A pushy loan officer isn’t a good loan officer. There are exceptions to every rule. If you’re the one dragging your feet, for example, if you’ve been considering doing a refinance and you’re taking two months to make an initial decision, then anybody will get a little frustrated at that situation. However, if you’re comparing rates and take a couple of days before you decide to move forward, that’s totally understandable and even encouraged. So if you get someone who’s super pushy, it’s not going to be a good fit for you. If you feel uncomfortable, I would advise you not to move forward. 

High Application Fees 

In my company, we do not charge any application fee. Even though we’re spending about $50 or more to run your credit, we usually absorb those costs and then if your loan closes, you pay for it at the closing costs. However, sometimes, people do not close, and we eat the cost. 

Some big lenders charge a $500 application. I think that should be made illegal. Personally, I believe that if you are applying for a loan, it shouldn’t cost you anything. In my opinion, if you are working with a bank, lender, or broker that charges about $500 to $800 application fee, or even $200, what is it for? Is it to make you committed to the lender? It doesn’t benefit you in any way, and that’s something you should be looking for at every step of the process. “Is something they’re doing making me uncomfortable?” “Does that make me feel like it’s benefiting them or me? 

Your loan officer should be doing everything they’re doing to benefit you and not themselves. They are going to get paid one way or another. They might not get paid as much on every loan, but they get paid when the loan closes, and unless they’re greedy as a loan officer, they should be doing everything in the client’s best interest. Your loan officer shouldn’t be trying to get you into a loan that makes them more money or get you to commit to them by making you pay an application fee. It does not benefit you, the client, in any way.   

This is my philosophy and that of everyone that works with me. Everything should be done to benefit the borrower. That should be your primary concern. They’ll know it when you benefit them and want to stick with you as a loan officer. Hence, we make sure that we do everything possible to make it the best loan for them so that even if they do shop around, they’re not going to find a better deal. It’s that simple, So if there’s anything like an application fee or a high-pressure sales tactic or anything like that, then it’s probably not the proper loan officer to work with.

Shopping Around 

Lastly, an excellent way to see if you can trust your broker is to shop around. If you find somebody whose personality you like and feel like you’re not being pressured, go ahead and get that loan estimate from them. However, if you feel something is a little off or they’re not being quite aggressive enough on the rate, you’re well within your rights to go out and ask another loan broker. Luckily, there’s no shortage of them, so you can say, “Hey, this is my situation. I’m wondering what rate you can get me.” 

My advice is that if you are going to shop around, don’t show the other loan broker what rate you’re getting until they come to you with a rate. Now, if you’re shopping around and you get a rate and another higher rate from a different loan broker, feel free to say, “Hey, my other loan broker is doing much better. Can you beat it?” If they only beat it by a few hundred or even a thousand dollars, I would say it’s not worth switching because usually, the person who can get you the lowest rate right from their initial offering will be a more honest person to work with.

Hence, if your initial loan officer gets you at 4% and your next loan officer gets you at 4.5%, you can let them know the differences in the rates. If they come back saying that they could also do 4%, it shows that they were being greedy. This is why I advise you to get a loan estimate. You see the numbers raw and can ask questions like, “why were you at 4.5% and suddenly now you’re at 3.875% or 4%? 

Conclusion

Again, the biggest thing you’re going to have to ensure that it’s a very trustworthy loan officer is in what you get in writing. Using your instinct or the attitude and personality of the loan officer to judge is a good technique to make sure that you feel comfortable with the person. However, you should get that loan estimate. Even though it’s one of the first things I mentioned, I’d like to reiterate and tell you that a loan estimate is your best protection. With it, you can make comparisons to another loan estimate. If they’re giving you one of that phoney-baloney one-pager, saying that’s your rate, don’t give that any mind. It is a completely useless piece of paper. 

In my opinion, you want a complete three-page loan estimate. Do not forget that I have already explained everything about a loan estimate, including how to read and interpret it. You can check here for it so that you’re familiar with how to read it. You will know where they can hide fees, what can be changed or not, when it’s locked or not, and all the other things you need to know. You’ll also be better equipped to compare your loan estimate from one lender to another when you go through my explanation. 

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