If you have ever been pitched the idea of a 60-second mortgage approval, you probably appreciate that some things are just too good to be true.
Red Flag #1: Extra Fees
Are you being charged a fee on top of the interest rate on your mortgage? Find out which fees are okay and which should be investigated further.
Unless you have bruised credit or a bankruptcy, most lenders do not charge a percentage fee over and above the interest rate (there are some exceptions). The appraisal fee is okay and quite common, however oftentimes mortgage brokers will negotiate even this with the lender so you don’t have to pay.
Your best defense is to carefully read what you’re signing. If you’re unsure, have a real estate lawyer look over the documents first. If you get an uncomfortable feeling but you’re not quite sure why, that’s sufficient reason to get a second opinion.
Red Flag #2: The 60-Second Mortgage Approval
While these quick preapprovals can offer some reassurance by giving you an idea of your approximate budget, they are usually not worth much when it comes to an actual offer to purchase.
If you plan to rely on one of these speedy preapprovals to support your offer to purchase, you may want to exercise caution. If your lender has not asked you to provide supporting documentation like a Notice of Assessment, proof of income, paystubs and so on, chances are good this type of preapproval won’t hold up when you need it to.
Consider taking the extra time to go through a formal mortgage preapproval with your lender. It may take a few days, or perhaps even several days, to secure this. However, in the end you will want a preapproval that is solid enough to get you all the way through to your mortgage commitment.
Red Flag #3: Are They Full Time?
Is your realtor or mortgage broker full time or part time?
If you’re working with a part-time broker, know that responsiveness could be an issue because they likely will have other job demands on their time. Working with a part-time broker can sometimes mean inconsistent attention paid to their clients. It could also mean missed details that could turn out to be very important to your purchase or sale.
A full-time realtor or mortgage broker is fully dedicated to the job at hand. With a purchase as important as real estate, make sure you know which category your broker falls into.
Red Flag #4: Mortgage Application Fee
Is your mortgage broker taking a fee just to process an application?
Know that this is an unusual practice and that reputable mortgage brokers usually charge nothing to the client either in terms of upfront or overall fees. Mortgage brokers are compensated by lenders, not clients.
If you are at all uncomfortable with a conversation you’re having with a mortgage broker, it is worthwhile to get a second opinion before you pay any unnecessary fees.
Red Flag #5: Marijuana Plants on the Patio
Did you notice marijuana plants sitting outside on the patio belonging to the home you are considering buying?
If a seller seems to have a lot of cannabis going on outside the house, exercise caution. In the winter months, moving that operation inside the home can cause serious problems for the property. The moisture and humidity needed to grow cannabis plants in a basement can easily lead to big problems for you down the road.
Red Flag #6: Quick Flips
Was the home purchased a few months ago and is already back on the market?
This could be an innocent change of plans or job, even a separation or divorce. But it may mean a quick renovation without the proper attention paid to detail. Or it could even be that the home has systemic problems that the seller discovered after purchase and does not want to deal with.
If you’re walking through a home that was bought and sold very recently, pay close attention to the structure and flooring. Watch for new paint that may be camouflaging issues or water damage, floors that are uneven, ceilings that are not flush with the walls.
And remember to get a home inspection, even if that means getting it done before offer day.***
Subscribe to Monthly Newsletter
Explore More Articles
Daily Listings to Your Inbox
What's Your Home Worth?