How Do You Verify a Lender Is Actually Legit?

Question

I’m getting ready for my first DSCR loan and honestly one thing worries me more than the deal itself: how do you fully verify the lender is legit before wiring a big down payment?

What do you guys normally check before sending money?

• How do you verify the LLC/company is real?
• How do you know the lender won’t disappear after the deposit?
• What red flags should I watch for?
• Do you use attorneys/title companies for protection?
• Is there a way to verify they actually fund deals consistently?

Would appreciate advice from people who already closed DSCR loans. Trying to avoid rookie mistakes.

Doug Smith · Answer

First, you wouldn't be wiring a down payment to the lender, it should be going to the closing agent. A lot of us lenders have NLMS licenses, so you can check it from this site: https://www.nmlsconsumeraccess.org/ . You can also use other social media platforms and look at the age of the account. There are so many posts on BP that show "1 Post/ 0 Votes" that I don't pay a lot of attention to the forums like a used to. It's full of seemingly fake people. Good luck to you!

Travis Erickson · Answer

Smart move to ask this now. Due diligence is absolutely critical with DSCR loans because you are dealing with higher capital and non-QM lending. As someone who works on this side of the business daily, I actually encourage my clients to vet us thoroughly. If a lender gets defensive about basic questions, that is your first sign to walk away.

Here is the checklist I would use to protect my own money.

The NMLS Search

This is the baseline for any professional. Go to nmlsconsumeraccess.org and look up their license number. You want to verify they are registered to do business in the state where your property is located. While you are there, look for any history of enforcement actions or serious complaints.

The Wire Transfer Litmus Test

This is the most important rule of the bunch. Legitimate lenders use licensed third party title companies or attorneys for every closing. You should never wire a down payment directly to a lender. Your funds ought to sit in a protected escrow account until the day of funding. If they ask for a large commitment fee or down payment via wire to their business account, it is likely a scam.

Confirm the Company Footprint

Check the Secretary of State website to see how long the LLC has been active. A physical business address is also a must. You want to avoid anyone who only operates out of a PO Box or uses a generic Gmail or Yahoo email address.

Use the Title Company as a Shield

Ask the lender for the name of a title agent they have closed with recently and then call that agent. Title officers are the best boots on the ground to verify if a lender actually performs at the closing table. If the title company has never heard of them, you have your answer.

Watch the Red Flags

Keep an eye out for rates that seem way below the current market average. If it looks too good to be true, it almost always is. Also, be wary of anyone who pressures you to move fast before you have even seen a formal Term Sheet or Loan Estimate.

The bottom line is that legitimate lenders want you to verify them. It separates the pros from the scammers and keeps the industry clean. Since your deal is in Cleveland, just know that I am licensed in Ohio and happy to help if you still need a hand with this one. Feel free to message me if you want to chat more about the local market there.

J Castro · Answer

Hi@Mohamed Mhamed, welcome to BP!Great question. One of the most important things to understand is that you generally should not be wiring your down payment or earnest money directly to the lender.

In a typical DSCR transaction, the lender’s job is to:

• Review your application and supporting documents• Underwrite the property and borrower• Order third-party reports (appraisal, title, insurance)• Issue loan approval and closing documents• Wire the loan proceeds to the title company or closing attorney at closing

Your down payment and closing funds should be sent to the title company or closing attorney handling the transaction, where the funds are held in a regulated escrow account until closing.

The main things you should verify about a lender are:

• Can they clearly explain their terms and fees?• Do they communicate consistently and professionally?

Red flags include pressure to wire funds directly to the lender, vague fee explanations, and poor communication.

A legitimate lender should focus on structuring and funding your loan—not holding your deposit.

Crystal Smith · Answer

We do the following with new lenders

1. If they are a hard money lender they must be licensed and you can then check with the secretary of state that they are licensed in to determine if they are in good standng.

2. If they are a private person then we ask for referrals and/or request Verification of Funds

3. Regarding deposits- If you mean points or fees that you pay to a lender, we don't pay them until we are 100% sure they are legit.  If you mean deposits, like downpayments on a property- Those are not paid out to a lender.  If a deposit is required it's escrowed with a 3rd party (Title company or attorney); never the lender

4. We always use a title company and 90% of the time use an attorney

5. The only way to determine if they actually fund deals consistently is to research the lender, get referrals,......  You can use this site as a way to find out if anyone in the community has used the lender.

Mills Thumser · Answer

Hey Mohamed! Great question. Biggest red flag there would be sending the lender a wire directly, especially before closing date. There should not be a down payment sent to the lender.

Lenders will underwrite you and the deal upfront, providing things like a loan quote, borrower application, etc. If they're offering you set terms that sound too good to be true, before they've even taken a look at your borrower profile or rent roll, not a good sign.

Easiest way, as many others have mentioned, is even to do some quick research on the company itself. Look at their website, LinkedIn, Social Media, or reviews to ensure legitimacy. It's typically pretty obvious from these items whether it's a reliable capital resource. Any sites/pages solely created with AI, likely a tell that it may not be credible.

You'll always need a Title company for closing and in some states an attorney is also required for closing.

Trust your gut! If you have any other questions on this, feel free to reach out.

Nyron Isaac · Answer

The absolute golden rule of real estate is this:

You never wire your down payment to the lender. All of your down payment funds must be wired directly to the neutral Title Company or Closing Attorney handling your transaction. The title company holds those funds in a secure escrow account and will not release them until the lender also wires their portion of the loan to fund the deal.

To verify the lender is legitimate, look them up on the NMLS Consumer Access portal to check their licensing history, and have your closing attorney vet their lending credentials before signing. If a lender asks you to wire them a down payment directly ahead of closing, walk away immediately

Austin Clarence · Answer

You will never send a down payment to a lender, that is handled through escrow. Try to do some digging, make sure URLs on email match up, read reviews, research the company on Bigger Pockets.

David Leggett · Answer

I have a really good lender contact who specializes in DSCR loans if you need a good contact in the Cleveland area, feel free to let me know.  Thanks!

How Do You Verify a Lender Is Actually Legit?

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