Mortgage Lenders you should probably avoid

For most people, buying a home is the biggest purchase they’ll ever make. Bearing that in mind, your choice of mortgage lender is a pretty important decision. You need a lender that you can trust to work for you—not someone whose only interest is the money they earn from signing you up. So how do you spot a bad mortgage lender?

One of the most obvious warning signs is a lender who tries to convince you to borrow more money than you can afford, or more than you want to. They might try to press you into getting a higher risk loan that lets you borrow more (such as an interest-only mortgage)—and sure, that means you could afford a bigger house…but it also means that you run the risk of defaulting on a monthly payment. A lender who pushes you to borrow over your limit is only trying to increase their commission, and they’re not looking out for your best interests.

When you make a mortgage application, you should receive a Good Faith Estimate within three days. This is required by law, and should include estimates of expenses relating to taxes, title insurance, and inspection costs. Your lender must also disclose your annual percentage rate. This includes lender fees, insurance, interest, loan origination fees, and points. If you don’t receive the Good Faith Estimate or the APR within three days of your application, find another lender.

If your lender appears to be dishonest in any way—ditch them. If they ask you to sign blank documents, or if they suggest that you act dishonestly (for example by falsifying information on your application) to increase your chances of getting the loan, find a new lender. If they’re encouraging you to be dishonest, how can you be sure they’re being honest with you?

You should also be wary of lenders who make outrageous promises for great deals on your mortgage. If they’re promising you no closing costs and no points, read the fine print—those mortgages have substantial penalties and penalty charges built into the contract that you might not see at first glance.

If any of those warning signs are applicable to your situation, it’s time to think about finding a new lender. There is an important point to consider here, however. If you have a significant problem with your lender early in the application process, you’re in a good position to fire them and find someone else. If you haven’t invested a huge amount of time, then you don’t have anything to lose. But what if you’re trying to get a bad credit loan, and you know you’ll have trouble finding another lender who can offer you a mortgage? Or what if you get to the closing stage and your lender produces a contract that’s different from the one you’ve already agreed to?

Unfortunately, sometimes it’s better to stick with the lender you’ve got, even if you’re not entirely comfortable with them. Canceling the contract at closing time might put you in breach of contract with both your lender and with the seller of the property. If you’re in breach and the seller wants to sue, they have every right to under the law.

If you end up in a situation where finding a new lender will cause more harm than good, then it’s better to stick with what you’ve got—at least temporarily. Once you’ve gotten that far, you might be better off completing the transaction and then refinancing as soon as you’re in a position to do so.