This is not a word of mouth situation, unfortunately I experienced this first hand with a client and it really struck a nerve with me.
One of the first things you need to do when buying a home is get a pre-approval letter. Most buyers will get a referral from a friend, family member, or their Realtor. As a Realtor that has been in the business over 10 years I work with 2 lenders that I trust with my clients, trust with my own home, and have established a great relationship with. I know they treat my clients like family, take care of their needs, don’t charge junk fee’s, and look out for their interests. When a client tells me they already have a lender I always recommend getting a 2nd quote, you need to have two quotes to understand your not being overcharged and your getting a fair rate. There is no negative to talking with two lenders. You wouldn’t hire the first contractor to renovate your home, you get a few quotes…..same principal applies to lenders.
When my client told me who they were using I was familiar with the lender, haven’t used them specifically but haven’t heard anything negative either. The lender was referred to them from friends that have used them a few times so they felt confident with the lender. I told my client to call one of my lenders just to make sure they are getting a fair deal. That call they didn’t make would cost them more than we knew.
The overall process from contract leading to closing went pretty smoothly. No surprises or issues came up for weeks so things were looking good. We received loan commitment on time and my clients were happy to close on their home very soon. About a week before closing I like my clients to have a rough idea of the funds needed to close and the lender said they were working on it. Now we are 2 days before closing, my client finally gets their preliminary HUD statement showing what they needed to bring to close, they emailed me asking if it looked right. Far from it!
After 10 years of this business I can estimate pretty close the fee’s and charges a lender would charge (based on the lenders I use), I was shocked to see the figure for the Loan Origination Fee my clients got hit with. As I looked over the HUD statement I was seeing approximately $4,000 in questionable charges. I immediately got on the phone with one of my lenders and wanted his opinion. He figured my clients were getting the same rate any lender would have been charging at that time (based on market rate, excellent credit, etc), recording fee’s were in line, credit report fee was good, the Loan Origination Fee was heavily padded. From what my lender explained to me this is partially where the lender’s pay comes from and lenders have some flexibility with how much to charge here within guidelines. Many lenders keep this fee on a lower level because the repeat business is important to lenders (and Realtors), and they like to make sure their clients are happy with their services. Everyone needs to make a living, but not by taking advantage of someone.
So this lender was used repeatedly (over 4 times) within my clients friends and was referred to my clients so they felt confident with using them. Now we are a day before closing and I have to explain that they got over charged around $4,000 and there was literally nothing I could do to help. Not closing breaches contract and opens up a bigger problem, and they couldn’t move into a home they were excited about. So they called the lender to get an explanation and asked if they would bring their charges down to match what my lenders would charge, they were given a song-and-dance which lead to NO.
My clients ended closing on their dream home, bit the $4,000 bullet and swore to never use this lender again. To top it all off the lender “forgot” what time we were closing and never made it to close, so my title company took care of the documents. Hopefully what comes around goes around for this lender. The repeat business they could have earned from my clients went right out the window because they got greedy.
So when the time comes for you to purchase a home, or refinance a home take the time, make a couple calls to different lenders and make sure your getting a fair deal. You don’t want to find out that 5 minute phone call you didn’t make ended up costing you $4,000.