Investors, what do you do when a lender changes the terms on you prior to closing?

Question

Seems like this is happening very often now. I am curious to know what would you do in this instance?

Christian Wamsley · Answer

This has happened to me a few times in the past. After cursing their name (privately), I shift quickly into a “save the deal” mindset. That usually means working with the seller on an extension and moving the file over to a more reliable lender.

Now that I’m brokering, I rarely run into these issues anymore—but when it does happen, it’s usually because I took the risk of trying out a new lender.

The bigger lesson here is how to vet a lender upfront to reduce the chances of this scenario. The best way I’ve found is to:

• Disclose as much as possible about the property and the borrower early on
• Keep communication open and consistent with the lender
• Pay attention to red flags—if a lender goes dark during the process or stops giving clear updates, that’s often a sign the deal is in trouble

Disclose as much as possible about the property and the borrower early on

Keep communication open and consistent with the lender

Pay attention to red flags—if a lender goes dark during the process or stops giving clear updates, that’s often a sign the deal is in trouble

At the end of the day, surprises still happen in this business, but having backup options and strong relationships with multiple lenders can make all the difference.

Erik Estrada · Answer

Solid Tips!

Glad to see you are on the brokering side. I am super reluctant to work with new lenders off the bat, but sometimes you do have to take the jump from time to time especially on the hairy deals. I think it is super important that a broker discloses if they have worked with the lender they are referring you too as this avoids any potential heartbreaks..

I also like to ask other brokers if they have worked with a specific lender in the past. This will give you a lot of valuable insight.

Jerry Agbon · Answer

Walk away from that lender, never to use them again. Then inform the seller immediately, and negotiate an extension of the closing date while I look for another lender. I've had something similar happened to me, had to walk away from that deal, only to return in six months, and was able to close the deal using a better lender this time around.

Henry Lazerow · Answer

I always try to have my clients use our vetted repeat lenders. It's much safer then using someone we don't personally have a safe track record with. A bad lender can easily blow deals. I have seen points added week of for rehab loans and on the conventional side pre-approvals given that blow up during underwriting. Many lenders don't fully understand the self sufficiency rule for FHA buying a 2-4 unit, so they skip over that and the deal dies mid review. You want a lender experienced who does a lot of 2-4 units if that is what you plan to buy. For single family and condos it's a bit less important and I have seen even the discount online only brokers work out fine for clients.

Mike Grudzien · Answer

Maybe talk to my real estate attorney??

Investors, what do you do when a lender changes the terms on you prior to closing?

Investors, what do you do when a lender changes the terms on you prior to closing?

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