The Problem With Loan Officer Reviews

Myth # 5: Mortgage reviews will help sort out the bad guys

Suppose you’re ready to start shopping for a lender. You sit down and begin digging through the reviews on Zillow – only to discover that the majority of the reviews you’re faced with are all 5 stars. Even though the 5-star rating system works well for reviewing an Amazon product or a muffin shop on Yelp, the system is far less effective when it comes to the mortgage shopping industry.

A mortgage is one of the biggest financial decisions you will ever make. Therefore, it’s important to base your decision on evidence that is more substantive than is offered by a few (potentially ingenuine) online reviews. This is highlighted when digging through sample reviews offered by Zillow. It is notable that every single person reviewed has 5 stars – a situation which is likely only possible if the loan Officer being reviewed has handpicked and initiated the reviews in question.
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This creates a sense of misinformation and confusion for mortgage shoppers who are trying to sort through their lending options. Instead, mortgage shoppers need to be able to differentiate between lenders so as to determine if the loan officer in question meets the shopper’s needs and expectations.

From the borrower perspective, these expectations should consist of the following:

  • Does the Loan Officer have a record of delivering the rate he or she promised?
  • Does the Loan Officer have a record of delivering the cost he or she promised?
  • How long did it take to close the loan?

The problem with these reviews is that they typically fail to adequately answer these questions. Not only that, but it is highly likely that the majority of these reviews were initiated by Loan Officers with whom they had good experiences – meaning that the reviews tend to be biased and unhelpful.


Myth # 6: Los are on a fixed commission so they can’t rip me off

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Credit Reports Vary Depending On Who Pulls Them

Myth #4: Credit Scores don’t drop when LOs do credit checks while I am shopping around for a mortgage

Contrary to the popular belief, your credit score can drop as more and more LO’s pull your credit as you are shopping around for your mortgage.

If you, as a consumer, use a company like Credit Karma to pull your credit score, the number you see may differ from the FICO score that your Loan Officer pulls. This can be very confusing for borrowers who expect to see numbers that are exactly the same. In order to understand why this is, it is important to note that credit reports pulled by consumers are supplied by a different system than the reports pulled by lenders. Consumer scores are reported by a system called Vantage, while loan officers pull reports directly from FICO.

The Vantage system was developed with the goal of empowering consumers by providing them with unhindered access to their credit scores. An added benefit is that the Vantage system approaches credit scoring in a way that is superior to FICO scoring, which is out of date. However, the two scoring systems do not calculate scores in the same way. Different formulas for determining creditworthiness equates to different overall scores.

A variety of reasons explain the existence of this issue – ranging from the secondary market, a monopoly within the credit scoring industry, and well-intended but constrictive rules and regulations. While these are all issues that need to be addressed, in the meantime consumers must focus on not getting caught up in exact scores. If you have good credit, you may score 745 with one system and 780 with the other. In this instance, your credit is good enough that there is no need to fixate on the exact number.

However, if you have a score of 620, as opposed to 640, then you are likely to run into issues as a credit consumer. This is because, in the mortgage business, 640 is the minimum score for getting you a seat at the table. However, it is important to keep in mind that this score is not ideal for seeking a loan, and is likely to land you some of the worst possible pricing.

Therefore, prior to seeking a loan, you should set a goal of a credit score at 740 or above. This will help you to get the best possible pricing on your loan. Because a mortgage is the largest financial transactions you will ever make, it is imperative that you not allow bad credit to ruin it.


Myth # 5: Mortgage reviews will help sort out the bad guys

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Mortgage closing cost for dummies

Myth # 3:  Shopping for the title will save you a lot of money

There are other important aspects of your loan that you should pay more attention to than the title to save a ton of money.

The most important thing to know is what the closing cost is and how it is related to each rate. That is a lender’s advantage that they will use to screw you and leave you to dry.

Closing cost can be broken down into 3 main parts and it is color coded for high to low dollar amounts:

1. Lender Fees (BOX A)


Lender fees can be considered junk fees in a sense that lender controls it.  These are all moving parts so you have to understand how they all add up, but for now just remember that Lender fees include:

Underwriting, Processing, Origination, Application fee, Credit report Fee.

2. 3rd Party Fees (Box B, C, E, H)

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3rd party fees start with the title company which charges to search and makes sure you have and will not have a lean on your house (title insurance). The rest is charged to prep documents, deliver them to your house for signature and record everything once it is said and done. Can it be waived? You bet but you need to take a higher rate, so the lender can cover it for you and NO it’s not worth getting it waived for a higher rate. It is possible to shop this section but likely not worth the effort as you have way bigger eggs to fry in terms of getting a better rate and cost.

3. Prepaid (Box F, G)

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If you are trying to shop your Prepaids you are wasting time. They are your taxes, insurance,  daily Interest, mortgage insurance and anything else that needs to be collected for escrow. It’s probably the only time you can relax and not worry about getting screwed.

While some lenders will collect a few months in escrow, others will do 12 months.  It all depends on the lender and when the loan is closing.  You can not shop for the number of months it is collected. 

Typically done by the title company and they keep their numbers straight as an arrow. Unless collecting too much is affecting the underwriting and term there is nothing to shop here as it all depends what day of the month you close so they can collect enough prepaid interest.


Myth # 4: My credit scores won’t drop when LOs do credit checks while shopping around for a mortgage

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