“To sit there and think to yourself that this person who served our country is now going to get taken advantage of, and they had no clue, they had no idea,” the CEO of a mortgage company said.
For people looking to buy a new home, searching for the best mortgage loan can be complicated. Mortgage lenders offer different interest rates depending on the financial background of the person applying for the loan. Some lenders offer special loan programs for teachers. One would assume the same would apply to veterans. However, a new study shows that it is, unfortunately, not the case at all.
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The study, conducted by Own Up shows that veterans who get approved for a mortgage pay more for the loan than the average person. Some veterans, unknowingly, think they are getting a low-interest mortgage loan because of their military status and also because it’s lower than other loans. Yet still, the loan is typically more for veterans.
The study gathered information from 20 lenders for VA loans in the US, and they looked at the annual percentage rate the companies offered on all the loans they made in 2019. The study explains that “lenders make more money when borrowers close loans with higher interest rates and pay more in fees.” Lenders also know more information about the borrowers, allowing them to provide higher rates for some people than others.
The study provided three reasons as to why lenders overcharge veterans on loans.
For starters, “mortgage lenders claim that VA loan transactions are more challenging to process, take longer, and close at significantly lower rates than conventional loans.” This longer process gives lenders the incentive to charge more for VA loans.
Secondly, the reports show that VA lenders overcharge on origination fees. “This origination fee is almost double the average origination fee charged by lenders. On a $301,044 loan, this is an additional $1,575 in fees that must be paid upfront,” the report shows.
Lastly, various investigations show veterans are often targeted by other lenders who mislead them into refinancing their homes, which only extends their initial loan and exhausts their equity. For this reason, lenders justify giving veterans a higher loan rate.
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In an interview with NPR, Patrick Boyaggi, the CEO of Own Up, said lenders knowingly overcharge veterans and falsely make them believe they’re getting the best deal.
“And they’re veterans,” Boyaggi told NPR. “To sit there and think to yourself that this person who served our country is now going to get taken advantage of, and they had no clue, they had no idea.”
He adds, “When we looked at the spread, candidly, we were quite surprised that it was as wide as it was,” Boyaggi said. “The best lenders and the worst lenders were so far apart from one another.”