Among all the possible sources one can refer to for a mortgage, a trusted friend is often an option among the top few in the shortlist.
Since you are going to be paying for all that ridiculous costs on top of interest of a loan, why not let a friend earn some money from the expenses that you are going to make anyway?
Moreover, good old Joe who has been a childhood friend since twenty over years ago will definitely be looking out for your interest.
Or would he?
The reality is that many home buyers and home owners turn to their friends and relatives as their best bet for securing not just a mortgage, but a good one at that, almost as if it’s a given.
It would be a good opportunity to command that friend or family member around as a client, and doing him a favor by giving him free business which he did not have to prospect for might mean that he owes you a favor which he could potentially return in future.
And even if you don’t have a first or second degree friend, walking into the office of a local lender just down the block is so tempting.
Being a local yourself, these local loan officers must feel like it’s their duty to give you the very best of what the mortgage world has to offer.
The truth can be stranger than fiction.
I used to think the same way. But from experience through the years, I no longer give friends a free pass into my wallet.
Not that friends cannot be trusted.
It’s just that when they screw you, you REALLY get screwed!
And then you have to bear with the awkward moments of resentment at social gatherings of interacting with someone who betrayed your trust some time ago… and you’re still paying for that bad judgment.
Don’t get me wrong. I’m not saying that you should never get in contact with a “friend” when seeking a housing loan.
I’m just saying that you should hear me rant about the pros and cons of hiring a friend for a mortgage before deciding to do so.
Pros and cons of hiring friends
The first drawback of hiring a friend is the tendency for negligence.
Because he or she has acquired you are a customer solely based on that trust factor, this friends who is a loan officer or mortgage broker is unlikely to give you as much attention as a regular customer.
They assume that you are as good as closed.
They don’t need to spend time with you building rapport and settle with short and quick instant messages to communicate with you.
Before you know it, they are pushing you towards loans which you have absolutely no idea whether they are competitive.
All that the friend tells you is “Trust me”.
If this is really a worthy friend who you can count on in the trenches, everything would be fine.
The sun comes up tomorrow with fully fledged rainbows to greet you in the morning.
But unscrupulous friends can exploit that trust and take advantage of your gullibility.
And then there is the uncomfortable nature of questioning them.
The odds are that if you suspect something fishy going on, you are not going to call him out on it. There is a higher chance of you moving on to somewhere else.
Yet doing so can harm the friendship.
What are you going to do?
Instead of you telling friends in the same network about how you almost got scammed by an insider, you have that friend telling everyone how you walked away without a word leaving him stranded in the cold lonely office.
Social dynamics is a funny thing.
Thirdly concerns the disclosure you have to make to this friend.
Consider that applications for mortgages can have very comprehensive documentation requirements.
Are you really comfortable in letting him know how much you make… or how much you only make?
Let’s put it this way.
If your million dollar bank account have been revealed, can you visualize the possibility that that information being leaked and you become the target at social gatherings?
Or you are as broke as a chair and potentially become the target of jokes at the monthly social dinner?
How’s “innocently” telling everyone about how you have been late on your credit card bills for the whole of last year sound to you?
But enough of these potential social affairs.
Let’s go back to the gist of it all.
A friend will know your weaknesses, and will be able to play games of salesmanship with you knowing that you can’t walk away.
For example, I have witnessed people being absolutely fleeced by real estate agents and loan officers who are supposedly friends.
The worst part is that the victims know that they are somewhat being taken advantaged of, but are just unwilling to risk a friendship and call out their “friends” on their B.S.
They then have to sign up for those loans while telling themselves that it is worth keeping the friendship for.
The irony is that these are situations that they would have never got themselves into should they avoid hiring a friend in the first place.
In fact, a proper customer and service provider relationship with no strings attached will be any borrower’s best bet at securing the best loans.
The only advantage of hiring a friend, which is a very big one, is the possibility that he or she really has the resources to help you… and is going all out to look out for your interest.
Sadly, while that is not unheard of, it’s a pretty long shot.
Yet, it can sometimes pay off.
For example, I know of a few instances which loan officers gave their friends all the freebies, negative points and discounts they were authorized to reward a borrower without a second thought.
And one might really hit the jackpot with a local lender who makes it a corporate culture to serve locals to the best of their ability.
Anyway most brokerages will have the same access to the loans from a broker friend. And probably more than a banker friend.
So why put yourself in this strange predicament?