If you gravitate towards reading negative reviews in your research, or even just for fun, you can thank your brain's automatic negative bias. And our brains have the right idea because poor reviews serve us in practical ways. For consumers, they can warn against potential problems. For companies, they can indicate areas for improvement.
The goal for borrowers: choose the best mortgage lender
At Best Company, we believe data-informed decisions are better decisions. We recently performed a content analysis of all of the 175 1-star reviews in our Mortgage Rates category as of Fall 2019. Here we present our key data and insights on the most common mortgage lender complaints, including how to leverage this information to get — or provide, if you're a lender — the best mortgage purchasing experience possible.
Within each theme, we describe specific issues in detail, what lenders can do to improve, and what consumers can do to avoid those particular problems when they're mortgage shopping. Because when something goes wrong with your mortgage, sometimes it's the company's fault. But sometimes it isn't, since buying a home comes with inherent risks.
The opportunity for lenders: respond to reviews and use them to improve
Even good lenders get the occasional bad review. Sometimes lenders drop the ball. Sometimes borrowers have unreasonable expectations. And sometimes reviews are highly emotional.
Regardless of why negative reviews were written, consumers and companies stand to benefit from being aware of them. Prospective borrowers can watch out for common issues and avoid truly dishonest or otherwise problematic lenders, and companies can respond to reviews and improve their practices accordingly.
Along with providing consumers the information they need to make sound decisions, we offer tools for companies to improve customer engagement.
*Because this is an overview of general complaints, all specific company and reviewer names are removed. To better understand a specific company’s feedback, read their reviews.
Poor customer support — 54%
What are the common complaints about customer service?
1. Company representatives were difficult to reach.
- They never returned calls or emails.
- They took a long time to return calls or emails.
- They sent automated, rather than personal, responses.
- They didn't respond after an application was completed.
- They didn't respond after the applicant was denied a loan.
- Communication was poor between loan officers and underwriters.
- Communication was poor to other vendors like title companies and real estate agents.
2. Consumers didn't have a consistent contact point.
- Their contact person changed several times.
- Their contact person went on leave or vacation without telling them and failed to provide an alternate contact.
- Multiple divisions of a company contacted the consumer, asking for information already given to someone else.
3. Company representatives weren’t on the same page.
- They kept calling the consumer with loan offers after denying them a loan.
- They bombarded consumers with loan offers, then halted communication when an offer was pursued.
- They took too long to re-verify information over the phone.
- They sent frequent emails requesting information instead of sharing all needed details upfront.
- Multiple representatives within the same company asked for the same documents several times
4. Company representatives were unhelpful.
- They lacked training.
- They provided incorrect or vague information.
- They spoke rudely.
- They didn't convey genuine caring.
- Local support was good; corporate support was bad.
What lenders can do
Ask what the client prefers. "Put yourself in the client's shoes and communicate the way they communicate with you," suggests Meghan Handy, customer experience director and vice president at Embrace Home Loans. "For example, 'If something comes up, do I call you at work? Do you like to text?'"
Sarah Alvarez, loan officer at Family First Funding, explains, "Many people don't have time during the workweek to think about their mortgage, so often the best time to chat is over the weekend."
Prioritize communication. Develop a company standard where you commit to return emails or phone calls within a certain amount of time, such as 48 hours. In situations that require more immediate replies, such as the days after submitting an offer or the days leading up to closing, narrow the time gap even more.
Respond to every applicant. Don't ditch a consumer just because their application was denied. Walk them through potential ways to improve their likelihood of being approved for a loan in the future.
Share bad news right away. Regularly communicate the status of the loan, even and especially if you've hit a roadblock. "A simple weekly check-in can go a long way to ensure the client feels like they are in the loop," advises Realtor David Stroh, GRI, with RE/MAX Plus.
Melissa Okabe, real estate agent with Alta Properties, says she recently had an experience where a direct bank lender stopped communicating with her and her client as they were nearing the final contingency removal period. "My client later found out, through a letter in the mail, that the bank denied the loan. It was extremely disappointing that this lender almost cost my client her house by lack of communication."
What borrowers can do
Test the system. You can test out more than one lender's customer service before committing. Call or email multiple lenders with your questions and see who responds first. Who will send you a personal response rather than an automated one? Who is available over the weekends? Who is willing to work with you on a holiday?
Be upfront. Define and share your boundaries and expectations as you shop for a lender. How would you like to communicate? How often do you want to be notified throughout the process? How quickly do you expect responses to emails, calls, or text messages?
Be understanding, within reason. Though there is definitely a need for urgency when you're pursuing a mortgage loan, the workers behind the company are people too. Just like you, loan officers get sick, take vacations, and have families. Plus, they have other clients to assist.
Provide all of your documents as quickly as possible. Oftentimes, loan officers are waiting to complete the underwriting process because the borrower has not returned documents the loan officer has requested. The faster you can provide your loan officer with the required documentation, the faster you can get your clear to close.
Lack of transparency — 34%
What are the common complaints surrounding the lack of transparency?
1. The lender didn't follow through on a promise.
- They advertised a special offer and didn't honor it.
- They offered a company guarantee and didn't back it.
- They promised a lender credit amount at closing, then decreased it.
- They offered to waive a payment, then didn't waive it.
2. The lender didn't adequately inform the borrower.
- They put private mortgage insurance (PMI) on a loan without explanation.
- They incorrectly explained the recast process.
- They changed the closing costs.
- They didn't explain requirements.
- They didn't explain fees.
3. The lender was dishonest.
- They changed agreement of sale without speaking to the buyer.
- They hid fees within the loan.
- They hid a prepayment penalty within the loan.
- They under appraised a home.
- They over appraised a home to approve a more costly refinance.
- They charged more for escrow even when taxes go down.
- They claimed to suddenly encounter a roadblock.
What lenders can do
Be cautious about what you promise. As with most situations, it's better to underpromise and overdeliver. Alvarez says, "I have heard about lots of people being strung along for months being promised one thing only to be told at the end that it is not actually possible. How frustrating for the client!" And ultimately, the situation is frustrating for the lender, too, when the loan doesn't close.
Don't shy away from hard questions. Share all details about what is expected of the buyer in regards to the down payment, appraisal, earnest money, closing costs, PMI, prepayment penalties, and escrow payments. Ask about — and confirm — all relevant financial factors, especially student loan debt, which is often overlooked until the last minute.
Share bad news right away. Matthew Yu, vice president of Socotra Capital explains that when scenarios don't go well, it's a natural human reaction to not want to disappoint clients by giving them the bad news. However, he explains, "That's a big mistake. Being upfront with the client about their loan situation will not only allow you to problem-solve but also to build credibility with your clients."
Anticipate roadblocks. Before issues even come up, discuss potential roadblocks with your client. Brian Koss, executive vice president of Mortgage Network, advises lenders to "help borrowers understand how the process works and set realistic expectations." That way, he explains, "If there are bumps along the road, they don't come as a shock to the borrower. Ask direct, even probing questions and listen closely to determine a borrower’s true needs and fears, which they may not disclose without being asked."
Create a F.A.Q. Borrowers will oftentimes have the same questions. To help streamline your operations, create a user-friendly frequently asked questions document or page on your website to guide your wayward borrower.
What borrowers can do
Do your research. Read the terms and conditions under any guarantees listed on a company's website. Generally, lenders reserve the right to change guarantees and promotions at any time. Ask your lender specifically about prepayment options within your loan.
Be transparent yourself. You may not be able to control the transparency of your lender, but you can control the details you give them. In your loan application and afterward, share all relevant details that may impact your eligibility for a mortgage. Many borrowers are disappointed that their lenders don't identify problematic information until it's too late to resolve the issue before the initial closing date. You can avoid such situations by disclosing student debt, tax debt, and all other financial obligations upfront.
Get a second opinion. An appraiser decides how much your home is worth, and, in turn, the maximum amount the bank is willing to loan you. As the borrower, you are responsible to pay for the appraiser, but you don't have a lot of control around who does it since your mortgage broker hires the appraiser (often through a third-party appraisal management company). The bank's chosen appraiser is the authority on that particular loan. However, you can hire your own appraiser to serve as a second opinion.
Lender errors — 34%
What are the common complaints about lender errors?
1. Important financial details were missed.
- They didn't add a partner's income to a loan.
- They didn't tell the borrower that they needed more money down.
- They didn't realize you needed a co-signer.
- They didn't catch a student loan account until late.
2. The lender had a typo or misclick.
- They processed monthly mortgage payments twice.
- They charged for a late payment after a refinance.
- They did four hard credit pulls in one week.
- They incorrectly recorded bank account information.
- They didn't get names down correctly.
3. The lender incorrectly handled escrow funds.
- They misplaced funds into escrow.
- They incorrectly assessed property taxes.
- They communicated poorly with the city.
What lenders can do
Admit error. Mistakes are inevitable. No matter how good a company is, it's run by humans. Alvarez explains of her company, Family First Funding, "If a mistake has been made on our end, we always admit it right away and may try to correct it by waiving an appraisal or application fee or whatever makes the most sense as a remedy."
Respond from the top. Holly Andrews, managing director of KIS Finance says, "An effective way to resolve issues with unsatisfied clients is by having someone high up in the company, like the CEO, talk to the client directly. When the client realizes that their concerns have been passed to the top without them asking for it, they will feel that they are a top priority."
What borrowers can do
Repeat yourself. Be willing to share and re-share important details relevant to your loan, even if you've already included them in your loan application, including names, birth dates, assets, and debts. Don't assume your lender will catch any discrepancies because they might not, or they might not catch it until it's too late.
Audit paperwork. Where possible, look over the paperwork before it's sent to underwriting and again before closing documents are finalized. Work with your loan officer to do this face to face if there's a branch location near you or over email, video chat, or a secure document sharing platform.
Verify your taxes and insurance. To make sure your property tax payments from your mortgage servicer are going through, call the city or visit the property appraiser’s website yourself to confirm. You may also want to contact your home insurance provider, as yearly home insurance premiums are usually bundled in your escrow payments.
Slow process or delays — 24%
What are the common complaints about delays in the process?
1. Too much paperwork was required.
- The loan application was too long.
- The lender required irrelevant information.
- The lender required information to be notarized.
- The lender required information that took too much time to get.
2. Loan approval and closing took too long.
- The lender blamed the delay on underwriting.
- The process should have taken 30–45 days but took 60.
- The original closing date was postponed.
- The lender was slow to pay property taxes via escrow.
- The seller walked and the buyer lost the earnest money.
What lenders can do
Explain the process in detail. Most complaints are the result of unfulfilled expectations. So it's key to set realistic ones. "A good mortgage lender will explain the entire process on the front end so that clients will know what to expect," explains Corey Fager, a Realtor with Nashville Homes. He continues, "I appreciate when lenders share some possible road bumps and how they will handle them.
"For example, I've had many clients who have shared their frustration halfway through the loan process because they're being asked to provide more and more paperwork. Had that lender framed the process and given the buyers an expectation that they may have to send additional paperwork through the process, it wouldn't be a big deal to them."
Create a documentation reference sheet. Consider creating an all-inclusive list of everything you may need from the borrower prior to closing. When lenders ask for documentation from clients multiple times and fail to communicate why, that leaves clients in the dark, according to operations manager Matt Hackett of Equity Now. Anticipate and share needs before they arise.
Set up a tentative timeline. Even though there are so many variables that can determine how quickly a loan closes, map out what borrowers generally experience — without making promises. Hackett recommends that lenders "set expectations from the beginning of the process with accurate timelines and the steps needed to move the loan from application to closing." He says it's important to ensure that clients know that the process can be protracted depending on the loan type, purpose, and complexity.
What borrowers can do
Gather paperwork ahead of time. Get a head start on your mortgage by gathering some of the information you'll need before being approved for your loan, including the following, where applicable:
- Tax returns
- Bank statements
- Auto loans
- Student loans
- Credit card debts
- Current mortgage(s)
- Rent payments
- Divorce documents
- Retirement accounts
- Recent income statements
- Down payment gift statement
Lock your rate strategically. Many lenders offer buyers the option to lock into an interest rate in case rates rise. If a rate lock appeals to you, look for a lender that doesn't charge you for this service and that has an extended rate lock period such as Quicken Loans, which locks your qualifying interest rate for 90 days.
Realtor Daniele Kurzweil asks her clients to consult with her before locking their rate. "From start to finish, the whole process of buying in NYC takes roughly 90 days. What inevitably happens is that a mortgage broker hears that we have an accepted offer and tells the buyer to lock their rate that day. "However, Kurzweil explains, "that doesn't take into consideration the time it takes to finalize the loan" in her local market including the following steps:
- 10 days for the contract to be reviewed and the financials of the building to be verified
- 30 days to gather and submit paperwork
- 2–3 weeks for the building representative to review the paperwork
Kurzweil describes the disappointment that can come when things take longer than expected: "All of a sudden, the 60-day rate lock has come and gone and my clients are stuck paying for an extension."
Expect delays. Some loans will close within a month, but unfortunately, it can take much longer. If you keep your expectations low, you create space to be pleasantly surprised if the process goes quickly.
High rates or fees — 20%
What are the common complaints about rates and fees?
1. The lender charged too many fees.
- The fees and closing costs were higher than quotes from other lenders.
- The lender's title company charged more than others.
- The lender upped escrow fees after acquiring the loan.
- The lender charged a fee for locking into a rate.
- The lender charged borrowers to submit a payment.
- The lender didn't refund fees such as a building survey, appraisal, and home inspection when loan didn't close.
2. The rates were too high.
- Interest rates were high despite borrower's excellent credit.
- The rate jumped arbitrarily while market rates went down.
- The lender didn't offer a rate lock or guarantee.
- New terms required a higher interest rate.
What lenders can do
Explain the details of a mortgage quote. "Lenders can often be too aggressive or too optimistic in their quotes — that is, they quote terms based on an exceptional client," explains Ashley Baskin, advisory board member for Home Life Digest. She continues, "But many people seeking loans have issues with their credit, income, or other factors, and therefore the interest rate is higher than anticipated or the terms are a bit different." Baskin's proposed solution echoes a common theme among all complaint categories: "Don't oversell what you can really provide."
Explain fees upfront. Make sure borrowers know what fees they will be responsible to pay, such as a home survey where applicable, home inspection, appraisal, rate lock where applicable, earnest money, origination fees, and closing costs. Explain the terms behind each of these fees, including which ones are nonrefundable.
What borrowers can do
Be aware of standard fees. It's the norm for buyers to pay for some services out of pocket before obtaining a loan. You'll be responsible for some or all of the following fees, most of which are non-refundable:
- Title insurance
- Home inspection
- Credit report
- Land survey
Some fees, such as origination fees, escrow fees, and home insurance, are generally bundled within your loan amount to be paid off over time. Plan to spend anywhere from two to five percent of the purchase price of the home in closing costs.
Prepare financially before you buy. To improve the interest rates to which you qualify, take steps to improve your credit. Pay off your other loans and debts where possible.
Shop around. You can compare quote estimates from several mortgage lenders before initiating a hard credit pull and before committing to one. You can also explore how your mortgage terms can change based on down payment, credit score, location, and home value with online financial calculators. NBKC Bank has 17 financial calculators for mortgage shoppers to use for free.
Borrower didn’t qualify — 13%
What are the common complaints about being denied for a loan?
1. The borrower "should have" been approved.
- The lender didn't accept 1099 income (self-employment or independent contractor income).
- The lender wouldn't finance a manufactured home.
- The lender advertised that borrowers with bad credit would get approved, but still declined.
2. The borrower was given false hope.
- They were preapproved, then denied.
- They were approved all the way to closing, including signing and submitting final disclosure and closing costs, then denied due to an employment gap.
- They were charged fees, then denied.
What lenders can do
Explain why. "Outside of being told that their application for a mortgage was denied, what upsets clients the most is a lack of clear communication or reasoning behind it," explains Patrick Frank of Biproxi. Frank advises lenders to communicate thoroughly with prospective borrowers so they know how to improve their future mortgage eligibility. "If a client gets denied for one reason or another, there’s a chance they could come back to you once they correct their financial situation."
Take local markets into account. Pay close attention to the local market of your clients, especially if you're an online lender. New York City-based real estate professional Daniele Kurzweil says that she often works with clients who have prequalification letters from their mortgage brokers approving them to buy apartments at a certain amount. "What they don't realize is that the requirements for the bank and the requirements for the buildings are vastly different. Their mortgage broker might be someone based out of Texas, whereas they are looking to buy in New York City." In this situation, Kurzweil explains, "All bets are off. They have to go back to the drawing board, and we start the process over from scratch."
What borrowers can do
Don't take it personally. If you've been turned down for a mortgage purchase, even at the last minute, it doesn't mean the lender doesn't like you. These decisions are almost all about numbers. In fact, nobody wins when a loan doesn't close, so your lender is most likely disappointed, too.
Reapply. Your eligibility for a particular loan type can improve over time as you improve your credit and other financial factors. Plus, sometimes lenders change their standards or add additional mortgage products that may better fit your situation. Lenders often approve applicants with subprime credit for FHA loans. Don't keep a loan rejection from one lender stop you from applying elsewhere.
Focus on your credit. Credit scores are probably the single-most-important factor in what rates and mortgage programs a borrower will be offered, according to Terence Michael of Omni-Fund Mortgage Brokerage. "Make sure that you do not owe more than 30 percent of the total available credit on any one of your credit cards, even for a day," Michael advises. "This is one of the best hacks for either boosting your credit score or keeping it from dipping right when it’s checked by a lender or bank."
Be consistent and patient. "Keep in mind that you cannot fix your credit overnight," explains credit industry analyst Greg Mahnken at Credit Card Insider. "It takes time to build a strong credit file and demonstrate your worthiness as a borrower. You’ll need to demonstrate that you can make payments on time, keep your utilization low, minimize your applications for new credit, and have a healthy credit mix. The age of your credit accounts is also a factor, so keep that in mind before closing any credit card accounts." Other ways to build your credit include using a credit builder loan and adding rent and utility payments to your credit reports. Your loan officer should also have resources to help you improve your credit score.
Harsh late payment penalties — 10%
What are the common complaints about harsh penalties?
1. Lenders were inflexible or unreasonable when borrowers struggled financially.
- They wouldn't honor the plans arranged with a borrower's previous lender.
- They took funds without authorization.
- They foreclosed on the borrower's home.
- They wouldn't work with the borrower to adjust the loan during a slow time in employment.
- They sued the borrower for a late payment.
- They wouldn't approve an equity loan after a home disaster.
What lenders can do
Assume the client knows nothing. If you think you've over-explained some aspect of the loan terms, chances are, you haven't. Especially with first-time homebuyers, offer to go over the fine print with borrowers multiple times. Many consumers fail to ask questions because they worry about looking dumb. Explain exactly how to set up mortgage payments, what to do if the borrower struggles to pay, and what the consequences are for missing a payment.
Be flexible when possible. Work to understand the borrower's situation if they can't make a payment one month. What is going on with their job? Their family? Is it temporary? Within reason, explore ways to cut the borrower some slack through a repayment plan or a loan modification. Would a refinance help the situation? Can PMI be dropped? Can escrow payments be rearranged?
Craft a kind message delivery. If a penalty is necessary, remember that a human being is on the other side of the phone, mailbox, or computer screen. It's an ugly task to break bad news, but an understanding tone can soften the blow. Be willing to answer questions the borrower has about the situation, and don’t hide below the legal jargon.
What borrowers can do
Know the terms before you commit! Closing day is not the time to start familiarizing yourself with the terms of your loan. Ask questions about payment due dates, penalties, and other loan servicing details prior to signing the paperwork. Have your lender show you where everything is in writing. In some states, you’re given several days prior to closing to review this information.
Alert your lender ASAP. Don't wait to communicate until you miss a payment. When you miss a payment, the lender reports the missed or late payment, called a delinquency, to the credit bureaus, which will negatively affect your credit score. If you anticipate struggling to make a payment, contact your lender right away to see if there are any options to keep you in your home and salvage your credit. Potential solutions for a late payment or multiple late payment balance include the following:
- Loan modification
- Debt settlement
- Repayment plans
If staying in your home is not possible, your lender and your real estate agent will work with you to choose one of the following options:
- Renting your home
- Selling your home
- Short sale
- Deed in Lieu of Foreclosure
Track your loan servicer. Mortgage lenders will often buy loans only to sell them off to another company after closing or at any point throughout the term of the loan. If you make special arrangements with a particular lender, those may not be honored by the next loan servicer.