Lets face it. It has been a tough year for most. I am quite certain when we all toasted in the new year, we had no idea what was in store. With a new year brings new optimism and we all had stars in our eyes. And then...boom! COVID, wild fires, businesses shutting, delays in PCS, housing goods caught in storage from the over 30000 troops with delays in moving, housing shortages, more wildfires, and an election. Yuck. Over it. And yet, here we are, doing what we do. Pushing on. Forging ahead. Not giving up ground.
What makes all of this even more exciting is the predatory lenders that are out to "help" the military and veteran populations. Whether it is from a major VA Mortgage company (think the big ones...you know they advertise on every real estate website that they are the "leader in VA Loans" or that they are an exclusive amazing company that "helps Active Duty and Veterans.") or smaller companies that "help" the military communities with cash advances, consolidation loans, or payday loans, these companies definitely do NOT have our best interest in mind. What they do have in mind is that they can make some serious cash on our backs. Let's look at some specific examples...
- One major VA loan company, the self proclaimed leader in the nation, charges on average $10000 more in closing costs. They then promote rolling the ridiculously high closing costs into your mortgage. They claim this is standard and encourage the realtors working with them to write the amount for closing costs reimbursement into the offer for the house. Then they charge almost an entire percentage point higher than most local lenders! Over the life of a loan, this will cost the Veteran or Active Duty borrower, based on an average sales price, close to $70000. That is right! $70000 of lost equity and net worth because this company knows that most Veterans won't shop around once they have them approved. They also know most people don't know how the industry actually works, nor do they know the questions to ask. I am sure it is in the back of anyone's mind who has reached out to a company like this that "this company would only have my best interest in mind since they are large, in charge, and claim they love Veterans and Active Duty." Well, in the words of the late John Prine, "Your flag decal won't get you into heaven anymore." VHN is here to educate and help and break the cycle of predatory VA Lenders.
- Payday loans. Did you know that the average person who gets a payday loan advance will do it 11 times in one year and they usually do it within two weeks of the last loan being paid off? Why do you think you see so many payday loan places around military bases? They know we have a guaranteed paycheck and they know we must pay it back otherwise our CO is going to hear about it. They also know that with the stress of moving frequently, families needs, and our love of things that go boom, we need our access to cash when we think we need it. The cost of a payday loan is an average of $15 for every $100 borrowed. So, if we use base pay for an E6 around $4500 per month, and we used the payday service 11 times, you would forfeit $7425 annually to the payday "service" company. I don't know about you, but I can think of better ways to spend that!
- Car title loans. Did you know that 45% of Active Duty and Veterans have used a car title loan vs. only 7% of civilians?! Now, one could argue that it is because we have better cars, but I just don't think that is it. Car title loans often come with exorbitant interest rates and add to the already gaping financial hole.
Much has been done over the years for education and resources and yet so much remains to be done. In 2006 the Military Lending Act (MLA) capped interest rates at 36% (still a crazy number) for military members and their dependents. Also, several service organizations will provide emergency financial relief such as, VFW’s emergency grant program, Disabled American Veterans’ grants for disabled veterans and The American Legion’s emergency financial assistance program.
Concerning, VA Loans and lending, several acts have been passed (more about this in a future blog) to ensure that Veterans and Active Duty will not be taken advantage of when refinancing. Sadly, while some protection has been put in place concerning initial VA purchases and lenders do have a limit as to what they can charge, many lenders push the limits to the max while claiming they "help" Veterans and Active Duty, meanwhile, lining their pockets with our hard earned American dollars.
Furthermore, the forbearance program rolled out this year for mortgages will further hurt homeowners and we are bound to see a rash of foreclosures. This is especially unfortunate since we have been privy to the stats on these homes and the lack of knowledge of the homeowners. We have already seen homes in pre-foreclosure where the homeowner has tens of thousands of dollars of equity that they could use, but instead, they are allowing the home to foreclose. This is an instance where the homeowner would benefit to have a VHN Realtor in their corner to advise them on the best course of action and to collaborate with local lenders and resources to help them resolve the experience with dignity and credit intact.
So what can you do to avoid predatory lenders? When it comes to VA home loans, education is the key. Knowing current interest rates, options, and protocol is key, but obviously, you have work to do somewhere else and you should not have to be an expert in the mortgage industry to move forward buying a home. A few key points to remember...
- VA Loan interest rates are typically lower than conventional loan interest rates.
- VA Loans allow for a greater debt to income ratio
- If you have a 10% VA service connected disability, your VA funding fee is waived.
- Most lenders do not charge origination fees anymore
- Most lenders in the VHN network will either pay for appraisals, help towards closing costs, or refund a portion of their proceeds so that you can come to closing with little or no money and sometime even have your earnest money refunded at closing....because they respect the service to our nation.
It is not unusual for quality local lenders to have the highest respect for Veterans and Active Duty, and actually put their money where their mouth is. That is the primary reason to avoid large, predatory lenders that will do exactly the opposite.
As this year continues and more financial ramifications arise from COVID, we are bound to see increasing hardships for many families. Before you find yourself in a financial fly trap, reach out to the many resources available to find healthier alternatives to high interest loans, payday advances, or foreclosure. Answers can be found and help is available. Reach out to us and let us point you in a better direction. We understand where you are because we have all been there at one point or another in our life, so please don't wait.