Mortgage broker made a bad call - should I continue with him?

Question

I've been working on a refinance for a BRRRR in Indiana with a broker for the past couple months. I had the ARV estimated at $130k, with a loan amount of $97.5k. I had my rate locked at 7.375%.

I got a call from the broker today that we need to go with a different lender because he had apparently assumed an ARV of 133.5k to get the loan amount over 100k because he thought it would appraise for that much and he had a lender who had a min loan amount of $100k and would give me a loan with no prepayment penalty. Since the appraisal came in right at my estimate, we could not use the lender he locked the rate with, and we're now at 8% (if no point buy down).

One thing I like about this broker is that he fights appraisals and doesn't just accept the first number given, but in this case, he was not successful in fighting it. One thing I don't like about him is how long things take. I had everything ready to go for this loan in advance and I wanted to close when I reached 6 month seasoning (that was a month ago). I had a similar problem with timeline on my previous loan with him.

Here are my questions:

1) Should I be upset with the broker about the lender change? I acknowledge that the only reason I'm upset is that rates have climbed since we locked and he doesn't control that.

2) Is it reasonable to expect to be able to close as soon as the property is seasoned? It cost me a thousand dollars or so from just waiting around for the mortgage to close and pay off the hard money loan.

3) Is 8% a reasonable rate right now for a 30y fixed investment loan, or should I be shopping around? Appraisal is already complete and closing isn't far away, so starting over and also paying for an appraisal again is a barrier to switching at this point.

Thanks in advance for any advice or insights!

AJ Exner · Answer

Feels like more of a communication thing than anything else.

If they weren't upfront about the risk of 'if this, then this' that was being told, then that's probably the biggest concern. I would ask for a broker to be as accurate and transparent as possible, which also means that they have to be transparent about the risks and what that entails.

1) Should I be upset with the broker about the lender change? I acknowledge that the only reason I'm upset is that rates have climbed since we locked and he doesn't control that.

• I wouldn't be upset about that, necessarily. Things change, and especially in today's rate environment. But if there was inherent risk of loan size and loan amounts, that is more of something that should have been expressed on the front end as minimum loan amounts are pretty basic loan program requirements. It sounds to me like the broker wanted to get you set up with a heavily reduced PPP group, needed some things to happen, but when it didn't the expectations weren't effectively communicated

I wouldn't be upset about that, necessarily. Things change, and especially in today's rate environment. But if there was inherent risk of loan size and loan amounts, that is more of something that should have been expressed on the front end as minimum loan amounts are pretty basic loan program requirements. It sounds to me like the broker wanted to get you set up with a heavily reduced PPP group, needed some things to happen, but when it didn't the expectations weren't effectively communicated

2) Is it reasonable to expect to be able to close as soon as the property is seasoned? It cost me a thousand dollars or so from just waiting around for the mortgage to close and pay off the hard money loan.

• Yes, I like to start a refinance about 30 days ahead of seasoning so that when it hits, YOU are prepared and can control the timeline instead of it being the other way around

Yes, I like to start a refinance about 30 days ahead of seasoning so that when it hits, YOU are prepared and can control the timeline instead of it being the other way around

3) Is 8% a reasonable rate right now for a 30y fixed investment loan, or should I be shopping around? Appraisal is already complete and closing isn't far away, so starting over and also paying for an appraisal again is a barrier to switching at this point.

• Its not unheard of, but might be a whiff high. For a loan amount below 100k, the lenders that do that have significant rate adders that can add up (without knowing your FICO or if it is a 2-4 unit prop)

Its not unheard of, but might be a whiff high. For a loan amount below 100k, the lenders that do that have significant rate adders that can add up (without knowing your FICO or if it is a 2-4 unit prop)

All that to say, fully agree with @Christian Wamsley on the communication side. I've been on that side of the ship before and a seasoned broker might clearly define and explain the risks and possible delays and it is up to the client/investor to determine how much risk is "worth it" and how they want to proceed.

Good luck getting it done! Hopefully it happens soon!

John Leland · Answer

A broker that is fighting for the best deal he can find you is harder to find than one that is simply trying to close the loan. That’s how I interpret what’s going on.

It sounds to me as though you are in a tough margin where it could go one way or the other because of the appraisal and interest rates, you also have to consider credit report, Debt To Income, and so on. I'd give him the benefit of the doubt on this one.

Robin Simon · Answer

Hi Colin - honestly the rate move isn’t on him, nobody controls that, but I’d be a little annoyed he was banking on a $133.5k appraisal to get over that lenders $100k min and you’re only finding out about it now after the appraisal came back. Pushing the value to hit a min loan amount is pretty common but you should’ve known theres a “plan B” and what it looks like if it comes in at your number

On the timing, yes thats reasonable, especially if you had everything ready - most DSCR lenders will let you get the appraisal and most of the UW done before you hit the seasoning date so you can close right at 6 months. If it happened on your last loan too its probably just how they operate. Also theres a lot of lenders now that do 3 month or even “no seasoning” cash-outs so you don’t always have to sit on the hard money that long anyway

8% isn’t crazy for under $100k loan amount at 75% cash-out with no prepay, small loan amounts get hit with pricing adjustments pretty much everywhere. The prepay is probably your biggest lever, if you’re holding long term ask what a 3 or 5 year prepay does to the rate. A lot of lenders will also take a transferred appraisal (if it was through an AMC) so might not even need a new one, worth getting a quote or two before you close

Christian Wamsley · Answer

Hey ColinI’d look at this in three parts.

1. Should you be upset with the broker?I think it’s fair to be frustrated — not necessarily because the appraisal came in lower, but because it sounds like the strategy wasn’t clearly explained upfront.

As a broker myself, if I’m targeting a specific lender because they have the best pricing, but the deal only works if the value comes in slightly higher, that needs to be a clear conversation with the borrower. The borrower should understand the risk and decide whether the better rate is worth the possibility of delays, re-pricing, or needing to switch lenders.

2. Should closing happen right at seasoning?Seasoning varies by lender. Some lenders have no seasoning for proven investors, some are 3 months, some are 6 months, and some are 12 months.

I usually advise clients that the best options often open up around 6 months, but many choose 3-month options depending on market conditions, payoff pressure, and how much the current loan is costing them. The key is working backward so the file is ready as close to the seasoning date as possible.

3. Is 8% reasonable?
That's hard to answer without the full scenario. Credit score, DSCR, LTV, property type, loan size, prepay penalty, and cash-out vs. rate/term all matter.

That said, from pricing I saw recently, a borrower with a 720+ credit score and strong DSCR may be closer to the 7% range depending on structure. But smaller loan amounts and no-prepay options can definitely limit lender options and push pricing higher.

So to me, the issue is less about the lender change itself and more about whether the risk of that lender change was explained clearly before the file was started.

Reach out if you want to discuss options for this one or future ones.

Adam Summerer · Answer

The appraisal didn't hurt you, it came in right where you said it would. The miss was locking with a lender that needed $100K minimum when your own numbers put you at $97.5K. There are DSCR lenders whose minimums start around $70-75K, so I'd ask him to shop a couple of those before you accept 8%. And ask him straight up why the 6 month seasoning date slipped, that part is process, not the market.

Nyisha Walton · Answer

Hi Colin, smaller loan amounts under $100k are where a lot of DSCR lenders drop off, which is likely what happened here. We have DSCR options that work at that size with no long wait once the file is complete. If you want a second set of eyes on the terms before you lock again, I am happy to compare.

Noah Wright · Answer

Admitting you might have taken the gamble anyway if he'd asked is a fair way to look at it, and it's the right lens for judging him. What I'd weigh more than the rate gap is what changed underneath it. The first lender had no prepay and this loan carries a 5 year step down, so if rates drop in the next couple of years you'd be paying a penalty to get out of a loan you'd want to replace. With most DSCR lenders the prepay and the rate are priced against each other, so ask him to show you what a 3 year or shorter prepay costs with this lender before you close. A lock is only as solid as the value it was built on. How long do you plan to hold before you'd want to refi again?

Colin McCarthy · Answer

Thanks to you all for your thoughts. Sounds like he should have involved me more in deciding on the risk of a non-optimal appraisal and rate hike, but I might have risked it anyway if given the choice.

Clarifying points: 795 credit score, $1295 rent, single family home, 5y step down PPP on the 8% loan. This particular property was purchased with cash, so I guess it would make it a cash out refinance, not rate and terms.

We started the loan process a month before to line up with seasoning requirements, so I was surprised on both properties that we didn't close closer to the seasoning date. I kept mentioning the hard money loan to him, so he knew I wanted to hurry and close, but when I've asked him to clarify delays, it hasn't been clear to me whether there were unavoidable delays or if I was just low on his priority list. Might do a post-mortem with him after all is said and done, but I was trying to figure out if I should try to fix that issue for future projects or just move on to someone new.

Kevin Cecchine · Answer

On the broker: the real miss was locking you into a lender with a $100k minimum against an ARV you already estimated at $130k (75% = $97.5k). Once the appraisal printed at your number, that outlet was never going to clear — so this is more underwriting-path selection than him failing to control rates. Fighting appraisals is still a plus; the repeated lag that cost you roughly a month of hard-money carry after seasoning is the bigger process issue if it keeps happening.

On timing: yes, it is reasonable to expect an investment/BRRRR refi to close as soon as seasoning hits if the file was already underwritten and clear-to-close before that date. Seasoning is a calendar gate, not a reason to start the exit lender late. Pre-clearing the takeout 30–45 days out usually avoids that extra hard-money interest.

On 8%: for a ~$97.5k 30-year investment fixed in Indiana, 8% with no points is not outrageous right now, but it is still shoppable — especially with a completed appraisal you can often transfer or get at a reduced re-fee. Before you restart, ask (1) whether the current lender will float down or price-exception, (2) whether another investor lender will accept a transferred appraisal, and (3) the all-in cost of a 1-point buy-down versus staying at 8%. At this loan size, fees matter as much as the note rate.

Dan Duenas · Answer

Colin — three questions, three answers:

1. The appraisal isn't what went wrong. You called $130k and the appraiser agreed with you. The bad call was locking a lender that needed a $100k minimum loan against a $130k ARV. That's a $2.5k margin of error on an appraisal — the plan died the moment the appraiser wrote anything under $133.5k. The mistake your broker won't name: he built your close around the best-case number with no plan B, and then the communication went quiet while the plan fell apart. Be upset about that part, not the appraisal.

2. Closing right at 6 months is reasonable IF the file was underwritten ahead of time. Six-month seasoning is standard; starting the process 30 days early was the right move. The slowness cost you ~$1k in hard-money carry, which is exactly why the front-loading matters.

3. On 8%: for a sub-$100k 30-year investment loan, you're fighting the small-balance adjustment — most DSCR lenders price their best at $100k–$125k minimums (mine start at $125k, which is why I know this corner of the market). 8% with a 5-year step-down prepay and no points isn't crazy for $97.5k at 75% in Indiana. The lever I'd pull: ask what the same loan costs with NO prepay penalty. If the no-prepay version is 8.5–8.75%, the step-down is buying you real money — keep it. If it's 8.125%, the penalty isn't buying you much. And before you pay for a second appraisal, ask the new lender if they'll accept an appraisal transfer through the same AMC — often they will.

Short version: the broker's plan was fragile, the communication was the real failure, and the 8% is in the neighborhood for your loan size. Get one competing quote, compare total cost including the prepay math, then close. — Dan

Mortgage broker made a bad call - should I continue with him?

Mortgage broker made a bad call - should I continue with him?

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