A good broker can find you the right loan. A fake one takes a fee and disappears. Here is how to tell them apart.

Up front fee scams by brokers come up all the time in land lending. The pattern is almost always the same: a fast "approval," a lender they will not name yet, and a fee to "submit your file" or "lock your rate." Pay it and the broker stops answering. Here is how I would protect yourself.

Should I Ever Pay a Loan Broker Up Front?

No. A real broker gets paid at closing, out of the loan, on the settlement statement.

A broker's fee is earned when your loan closes, so it is paid when your loan closes. It shows up as a line on the settlement statement and the title company or closing attorney pays it from the closing funds. A broker who wants to be paid before there is a loan is asking you to take all the risk.

My rule covers lenders too: a lender should never ask for money up front. The FTC says any up front fee a lender wants before granting a loan is a cue to walk away (FTC).

Takeaway: if the broker gets paid whether or not you get a loan, walk away.

How Do Legitimate Brokers Get Paid?

At closing, as a disclosed line on the settlement statement, and only if the loan funds.

Ask the broker to put the fee in writing before you sign anything: the amount, when it is paid, and that it is paid at closing. On closing day you should see that exact number on the settlement statement. If the deal does not close, the broker is not paid. That is how the broker earns your trust.

How Can I Check Out a Loan Broker?

Confirm the lender yourself, and never let the broker touch your money.

  1. Get the lender's name and call the lender directly, using a number you find yourself. Ask them to confirm they are working with this broker on your deal.
  2. Get the terms from the lender, not only from the broker's email.
  3. Check any license they claim. If a broker gives you an NMLS number, look it up on NMLS Consumer Access. Many business purpose loan brokers do not need a license, so no listing is not proof of fraud, but a number that does not match is a red flag.
  4. Look up the broker's company on the state business entity search.
  5. Ask for two past borrowers and call them.
  6. Close through a title company or closing attorney you can verify. Your money should go to title, never to the broker.

What Are the Red Flags With a Loan Broker?

A fee before you see terms, a lender they will not name, and pressure to pay today.

I would avoid any broker who shows one of these.

Does Damen Capital Work With Brokers?

Yes, but we never pay or collect broker fees, and we never ask anyone for money before closing.

Brokers can bring us deals, and our application has a spot for them. Any fee between you and your broker is your agreement with them, and it belongs on the settlement statement. If someone says they are a broker working with Damen Capital and asks you for money, call us at 302-526-0200 before you do anything.

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Loan Broker FAQ

Should I pay a loan broker before closing?

No. A real broker is paid at closing, out of the loan, as a line on the settlement statement. A broker who wants money before there is a loan is a red flag.

How do I know if a loan broker is legitimate?

Call the lender directly with a number you find yourself and confirm they work with the broker, get terms from the lender in writing, check any NMLS license number they give you, and close through a title company you can verify.

Do business purpose loan brokers need a license?

Often they do not, depending on the state and the loan. If a broker gives you an NMLS number, look it up on NMLS Consumer Access. A number that does not match is a red flag.

Does Damen Capital charge broker fees?

No. We do not pay or collect broker fees, and we never ask anyone for money before closing. If someone claiming to work with us asks you for money, call 302-526-0200.

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