Whether you’re a broker looking for a lender to finance your client or a borrower looking for a loan, it’s important to take the time to research the mortgage company you’re thinking about choosing and make sure that they’re the real deal, particularly if you’re looking for financing outside your local bank.  Alternative lenders can be a great source for borrowers with credit or other issues, but brokers and borrowers alike must be careful when shopping for a lender.

There are plenty of legitimate non-conforming and hard money lenders, but if you’re not careful you could get duped. There are scams you should be on the lookout for. Generally, these scams involve a “lender” who collects a hefty amount in up-front fees and then claims they cannot proceed with the loan.

There are a few simple things you can do to vet a lender, during the course of the mortgage due diligence. The first and easiest step is to simply search the company in question on the Internet. There are also websites which investigate whether or not a mortgage company is a scam. Checking out a company’s rating on the Better Business Bureau’s website is also a good way to do your research before you settle on a lender.

Another way to check the legitimacy of a lender you’re interested in doing business with is to ask for references. If you’re a broker, ask the lender to give you the contact information of a couple of brokers they’ve done business with. Call those brokers and ask them about their experience with the company in question. If you’re a borrower interested in obtaining financing, ask for borrower references from the lender and ask those borrowers about their loan process.

There’s no shame in doing your due diligence to make sure a lending company isn’t really a scam. Gathering mortgage due diligence is something that lenders expect as part of the process. Legitimate lenders will have no problem providing you with the information you need in order for you to feel comfortable doing business with them.

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