Avoid Mortgage Scams: Three Warning Signs Your Lender Might Rip You Off

They Avoid Discussing Rates

A legitimate lender will be transparent about rates. If you ask about current rates and the lender dodges the question or gives vague answers, this is a red flag. They might say things like, "Rates change every day," or "The market is looking favorable."

While it's true that rates do fluctuate, a trustworthy lender should still provide you with a current rate based on your scenario. If they can't, walk away.

For example, my team and I discuss rates upfront. We go over rate sheets and explain what we’ve seen over the last two weeks. We prepare buyers for when they’re ready to lock in their rate.

If a lender refuses to talk about rates before you’re in contract, it usually means their rates are not competitive.

Vague Or Nonexistent Closing Cost Breakdown

Closing costs include various expenses like title insurance, escrow fees, attorney fees, homeowner’s insurance, and lender fees. A trustworthy lender will break these costs down for you. If a lender dismisses your request for a detailed closing cost breakdown and provides only a vague estimate like "it's around 3%," this is another red flag.

Different lenders might handle components of closing costs differently. One might estimate homeowner's insurance at $1,000 and charge high lender fees, while another estimates insurance at $3,000 and waives lender fees.

You need a clear line-by-line breakdown to compare and understand what you’re actually paying for. If they refuse to provide this, stop working with them.

No Interest Rate on the Pre-Approval Letter

If you get a pre-approval letter that doesn’t specify an interest rate, be wary. This often indicates the lender is not competitive in rate and wants to avoid the conversation for as long as possible. You should always know what to expect with rates before moving forward.

Take the recent case where a potential buyer contacted us. The lender hadn’t discussed rates, closing costs, or payments and issued a pre-approval letter with no rate mentioned.

As suspected, when we dug into it, the rates and fees were significantly inflated. All the rate and fee avoidance tactics by the lender were a clear indication that the lender was planning to take advantage of the buyer.

Bottom Line:

When you're in the market for a mortgage, it's crucial to be informed and vigilant. Avoid lenders who:

1. Avoid discussing rates.
2. Provide vague or no breakdown of closing costs.
3. Issue pre-approval letters without an interest rate.

These are clear signs that the lender may overcharge you with high rates and fees. Always demand transparency and detailed explanations. If a lender is unwilling to provide these, find one who will.

If you’re unsure whether your lender is giving you a fair deal, feel free to reach out for a second opinion. A good lender is proud of their rates and will always be transparent about the details.

For questions, you can text me at 786-933-2077 or email me at beeston@rate.com. Either I or a team member will let you know if you’re getting a good deal or not. Remember, a transparent lender doesn’t hide.

Jennifer Beeston

SVP Mortgage Lending @ Guaranteed Rate

Phone: 786-933-2077

Beeston@rate.com

www.zerostressmortgage.com

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