Are you a real estate investor wondering if your lender is too good to be true? Every year, thousands of investors lose millions to scams—don’t be next. Fraudulent lenders are everywhere, and falling victim to one can completely derail your investment dreams. In this guide, we’ll uncover the 9 critical red flags that scream ‘fraudulent lender’ and provide actionable steps to protect your investments.
Stay tuned, because tip number 7 could reveal if you’ve already been scammed.
Why This Matters to You
I’ve seen real estate investors lose thousands overnight due to lending scams—let’s make sure that’s not you. Today, I’m sharing my expertise so you can spot a lending scam before it’s too late! Remember: “Fraudulent lenders prey on your hopes, but knowledge is your best defense.”
The 9 Critical Red Flags of Fraudulent Lenders
1. Suspicious Contact Information
Pay close attention to the email address and phone number used in communications. Is the lender using an email with a legitimate company domain or just a generic Gmail address? What about their phone number? Google Voice, Snapchat, or other VOIP numbers often signal potential fraud.
2. Too-Good-To-Be-True Loan Terms
When a lender quotes interest rates significantly lower than market standards or offers 100% financing when legitimate competitors max out at 70-80%, your alarm bells should ring. Remember the golden rule: if it sounds too good to be true, it probably is.
3. Suspiciously Fast Approval
Legitimate lenders require substantial documentation before approving loans. If you’re getting approved almost instantly with minimal paperwork, you’re likely dealing with a scammer, not a legitimate funding source.
4. Demanding Upfront Fees
While application fees are standard in the industry, be extremely wary of large upfront payments requested before loan approval. Many investors have lost thousands by paying these “processing fees” to lenders who then disappear.
5. False Company Affiliation
Is this person falsely claiming to work for a reputable lending company? Take the extra step to contact the company directly through their official channels to verify the person’s employment. We’ve caught scammers pretending to work for our company when concerned borrowers called to verify.
6. Limited Online Presence
Do thorough research using search terms that include the company name or individual’s name combined with words like “scam,” “fraud,” or “lawsuit.” Look beyond the first few search pages—fraudsters are adept at burying negative information. Be skeptical if the company only exists on a single platform like Facebook or Instagram.
7. Aggressive Pressure Tactics
Legitimate lenders don’t desperately chase clients with incessant calls, emails, and texts. If someone is aggressively pursuing you for an upfront fee, that’s a major warning sign. Remember: you should be pursuing the lender, not the other way around.
8. Questionable Reviews
Be suspicious when a lender has no reviews or only suspiciously perfect feedback. Check for genuine reviews on third-party platforms like Google and the BBB. Pay attention to specific details in reviews that indicate real transactions versus vague, generic praise.
9. Perpetual Closing Delays
The ultimate red flag often comes at the end: one excuse after another delaying your loan closing. Common tactics include key decision-makers being “unavailable,” sudden funding “issues,” or other vague excuses that persist for weeks. Once this pattern emerges, you can be certain you’re dealing with a scam.
Protect Yourself and Others
Share this information with fellow investors to help them avoid costly mistakes. Knowledge shared is an investor protected.
If you’re looking for a lender you can trust with a proven track record, reach out to me at High West Lending.
About the Author: Corey Dutton, MBA, PLM, is a private lending expert with years of experience helping real estate investors secure legitimate funding.