Dispelling the Home Loan Myth of the Evil Lender
Home Loan Myths Are Usually Damaging. Misunderstanding Lenders as Enemy Combatants Not to Be Trusted Is One of the Worst. Learn Why Lenders Aren’t Your Enemy.
Home Loan Myths
One of the most common home loan myths is that mortgage lenders are predatory, untrustworthy, and generally nefarious. “They’re bad guys out to take advantage and you have to go into battle armed with your wits to ensure you don’t get a raw deal,” the thinking goes. This is both false and a problematic way to think about getting a home loan. If you end up with a lender that you feel is always trying to get the better of you and cheat you, you have a very stressful financial future in store for you. Ideally, you’ll find a lender that helps you meet some of your financial goals and makes you feel comfortable that you are both getting a deal that works, and if you don’t have this, it’s a good sign you should shop around some more.
The main reason you shouldn’t think of all mortgage lenders as evil is that this home loan myth is likely to make you accept such a reality, instead of hoping to find one of the more reliable variety. This is important for a number of reasons, but the biggest is that with a mortgage, you’re going to be dealing with this lender for years. It will make your life much better if you are on good terms and feel comfortable dealing with them. Even more so, if you ever decide to refinance, having a lender you trust makes life much easier and facilitates affordable access to the equity you will have stored in your home, in the form of a new mortgage.
Furthermore, having a lender you feel you can trust can lead to much better deals. They’re still selling you a product, so healthy negotiation is certainly in order. With a bank and an agent you trust, you are more likely to ask them appropriate questions and trust the answers you get. They are the mortgage experts, and they want you to feel comfortable and get a mortgage that you’re happy with, they the right kinds of banks have an incentive to answer these questions truthfully. This information and comfort should lead to better negotiations and options that will help you get a loan you can afford and put you in a home you love. So how do you go about separating the good lenders from the bad?
The worst kind of predatory practices are illegal. This doesn’t prevent the worst kinds of lenders from engaging in these tactics, because they gamble on the fact that their borrowers won’t know their rights or have the resources to protect themselves and stop these behaviors. So if you’re shopping around at reputable banks, you don’t have to worry about anything like hidden fees or insanely short grace windows if you’re a week or two late on a payment once.
However, there is a second set of concerns that may pop up with less reputable lenders as well as the worst sort, and you do have to protect yourself from these. The most common problems are requirements in the contract that you refinance with them and that you purchase other financial products at the same time as you pay for your mortgage initiation fees. Many also attempt to charge mortgage signing fees significantly higher than what is standard. If you see these kinds of things in your contract, and if you successfully identify them because you’ve done your research and are shopping around, then you are better off walking away. If you can’t for some reason, be sure to get that contract fixed to something reasonable, but it’s much better to find a lender you can trust.
Lenders also don’t want to be seen as dishonest or combative. Not only does having borrowers feel this way make the every-day activities of their job more difficult because they face customers constantly arguing, doubting, and questioning everything they say, it also gives them a bad reputation. They want to make loans, and most good banks want to make loans to people who can repay them on time. They make their money from initiation fees and interest, and then from the ability to turn around and make new loans using that cash, so they want healthy, responsible, trustworthy buyers. A reputation as dishonest predators makes it much harder for banks to attract that kind of borrower.
The reality is that there are some bad lenders out there, so it’s worth taking your time and doing some comparison shopping to be sure you avoid the worst. Getting a mortgage from one of them would be difficult at best. However, as one of the most popular home loan myths, the idea that all mortgage banks are dishonest is not only ridiculous, it can be harmful for your chances to get the loan you need.