7 RED FLAGS to Watch Out for When Refinancing Your Mortgage

So, you’re thinking about refinancing your mortgage, huh? Whether you’re chasing a lower rate or looking to cash out some equity, working with the right loan officer can make all the difference.

 The process can be pretty smooth if you know what to watch out for. Here are some things to keep in mind when you’re chatting with your loan officer, because the last thing you want is to be stuck with a bad deal—or worse, a bad experience.

1. Know the Rates but Don’t Get Stuck on Them

Right now, you’re looking at rates around 4.875% for a 30-year FHA or VA loan (with APRs sitting at 5.252% and 5.705%). For conventional loans, the rate is 5.625%, and the APR is 6.121%. But here’s the deal: Rates fluctuate, so don’t let a loan officer lock you in on a rate without considering your entire financial picture. Make sure you’re discussing what works long-term, not just what’s trendy this week. Chill loan officers will take the time to explain how market conditions might affect you—without rushing you into a decision.

And keep in mind, it’s not just about the lowest rate on paper—it’s about the full package. Some loan officers will flash a low rate to get your attention, but it might come with higher fees or less flexibility down the road. Take the time to understand how the rate fits into your overall goals, and don’t be afraid to ask questions. A good loan officer will appreciate that you’re invested in the process and will be happy to explain how the rate impacts your monthly payments, loan duration, and overall cost.

2. Transparency Is Key

If your loan officer isn’t upfront about fees and closing costs, that’s a red flag. There are a lot of moving parts in a refinance, from origination fees to third-party services like appraisals and title searches. A solid loan officer is going to lay it all out on the table, no surprises. They should also be cool with explaining everything—down to the smallest detail—so you know exactly what you’re signing up for.

Don’t just take their word for it—get everything in writing. Ask for a Loan Estimate and go through it with a fine-tooth comb. A transparent loan officer won’t hesitate to provide you with this document and will walk you through any line items that don’t make sense. If they brush off your questions or try to avoid giving you the full picture, that’s your cue to look elsewhere. It’s your money on the line, and the right loan officer will treat it that way.

3. Watch for the Sales Pitch

We all know when someone’s trying to sell us something, right? A good loan officer won’t make you feel like you’re at a used car dealership. Instead, they should be focused on what’s best for you and your financial goals. If they start pushing products or services that don’t really align with what you’re looking for, it might be time to reconsider. Ask yourself: are they educating me, or are they selling me?

Loan officers should be there to guide you, not push you into decisions that aren’t right for you. Beware of anyone who pushes add-ons like mortgage insurance or extra points without explaining the benefits and potential downsides. A good loan officer will have a service-oriented approach, focusing on building a relationship, not closing a sale. It’s your financial future, and a pro will help you feel in control every step of the way.

5. Experience Speaks Volumes

Refinancing isn’t a one-size-fits-all situation. Whether you’re going for a VA, FHA, or conventional loan, every loan type has its quirks. Make sure your loan officer has the experience to back up their advice. They should be able to break down the ins and outs of each loan option, answer any questions you throw their way, and help you make an informed choice without feeling overwhelmed.

6. Be Wary of Quick Promises

Some loan officers might try to speed through the process and promise you’ll close fast. But remember, refinancing involves a lot of paperwork, appraisals, and approvals. If it feels like they’re offering something too good to be true, it probably is. A good loan officer will give you a realistic timeline and guide you through it, step by step.

7. Understand the Fine Print

APR is one thing, but the fine print can trip you up if you’re not careful. Loan officers who are on your side will take the time to explain terms like prepayment penalties, balloon payments, and other potential gotchas. You don’t want any last-minute surprises, so ask your loan officer about these before you get too deep into the process.

Prepayment penalties can sneak up on you if you’re not paying attention, especially if you think you might want to pay off your loan early or refinance again in the future. A good loan officer will point out these kinds of clauses and help you weigh your options. They should be all about keeping things transparent, so if anything sounds off, don’t hesitate to push back and ask for clarification. It’s all about making sure your loan terms work for your life, not just on paper.