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

Gary, Indiana
Private Lending & Conventional Mortgage Advice
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Mortgage broker made a bad call - should I continue with him?

Colin McCarthy
Member since 2025 · 10 posts · 8 votes

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!

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AJ ExnerPro Member
Lender · Springfield, MO · Member since 2023 · 663 posts · 320 votes
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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

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

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)

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!

[email protected]417-427-2612
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  • Max Comperatore
    Technology · New York, NY · Member since 2026 · 68 posts · 18 votes
    2d

    Colin, the appraisal did not break this deal. Your broker inverted the underwriting. He solved for value to clear a $100k lender minimum instead of solving for debt service: $100k at 75% LTV requires a $133,333 ARV, so your own $130k estimate capped proceeds at $97,500 by construction. A 2.5% value variance destroyed the entire capital structure. That is a zero-margin path, and Kevin and Robin are right that you should have been shown plan B before the lock.

    Run the rate math before you fire anyone. 62.5 bps from 7.375% to 8% on $97.5k is $609 a year, $51 a month, roughly 4% of your $1,295 rent. The debt constant moves from 0.0828 to 0.0881, and DSCR moves from 1.93 to 1.81. Both clear a 1.25 floor with room. The note rate is not your risk.

    The $1,000 of carry is. One month of hard money on $97.5k equals roughly one full point, $975. You paid a point in delay to save nothing, and it happened twice. Treat the exit as a calendar gate: appraisal ordered at application, file clear-to-close 30 days before seasoning, so carry flattens at the gate instead of compounding.

    What is your all-in cost of capital from hard money funding to refi funding, expressed in points, and does his timeline actually beat a 3-month seasoning lender?

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