Incompetent lender stories, lets hear them!!

[Nolan M.]

I'm sure I'm not the only one who's crossed paths with a lender who you would never use again! We don't have to name names, but if anything we can all commiserate and maybe learn something new!

A few weeks ago I found a triplex for a good price and put an offer on it, which was accepted. I had a prequal letter from a lender that I used to buy my primary residence a couple years ago. Turns out he could only do 25% down and I was hoping to only put 20% down so I called another lender who I had done a deal with in the past. He told me he could do 20% down so we moved forward with him. 

About a week into it he comes back and tells me its actually 25% down, not 20%. Fine, whatever, its going to cost a few thousand extra but lets just get it done. We move forward with the second lender. We had offered 3k over asking price and the seller had agreed to credit that 3k at closing to help cover my closing costs. 

Fast forward to today, the day we supposed to sign! Lender has been telling me for two days that we are cleared to close. This morning he tells me that underwriting just realized that because of the extra 3k credit and tenant damage deposits being credited at closing, the total amount being credited to me by the seller at closing exceeds the allowable 2% of the sales price! He admitted that he was the one who was supposed to catch it, but didn't. He tells me to go ahead and sign, buying it at the same price and ask the seller to write me a check for the difference after closing! 

I'm so upset right now with this guy. As of right now we are scheduled to sign Monday at a lower sales price and bringing more money to close, but with this guy who knows!  :l

[Chris Mason]

Hi @Nolan M.,

You rewarded bad behavior there, by going with the person telling you what you "want" to hear, not what you "need" to hear. If it's a normal interest rate, fixed, and there are no/low points, then it follows that it's a Fannie/Freddie loan, because that only happens with government subsidies. Did you know that 30YF good rate no/low points only exists in the United States, where we have Fannie and Freddie? Lenders can be more restrictive than the Agency rules, but not less restrictive.

A quick sanity check by posting on BP would have revealed the Fannie Mae LTV Matrix and the Freddie Mac LTV Matrix, so upfront there was never a way that 20% down 2-4 unit non-owner occupied was ever going to happen - not if the loan included an attractive fixed rate and no/low points upfront, anyways. Interested party contributions are capped at 2% for investment properties, too. 

If it looks too good to be true, it typically is. But here's the thing Nolan: Who got your business? The guy telling you the truth upfront, or the one that mislead you the entire way through? You say he is "incompetent," but the competent guy didn't get your business. 

Mortgage lenders are housing providers. As a landlord, you are a housing provider too. So our two closely related professions have that in common. Think about it this way: The tenant that calls you an "incompetent" landlord, but still pays above rent every single month, on time & every time, and you completely ignore all maintenance/service requests... do you care? No, of course not. You've got your rent & no maintenance expenses, wee! But if the various tenants stopped giving business to you, would you care? Hell yeah you would!

It's one of the greatest frustrations to me, on my side of the lender/borrower divide, that you call this bait-and-switcher incompetent, and he misled you the entire way through, but you still gave him your business! (& I don't mean you specifically btw, this happens all the time to a lot of people)

The "bad guy" won here, and the guy I like, who told you the truth upfront, did not win.