Once you’ve decided to buy a home, you will realize that it is complex process that involves a lot people. Because of this, whether you’re a first time home buyer or a repeat one, it is critical to be aware of fraudulent schemes that have been designed by bad people to steal your money and your home.
There are many different kinds of mortgage options out there from an FHA loan, conventional fixed rate mortgage, adjustable rate mortgage, interest only mortgage, VA loan, Piggyback loan, and more. By reading up on these various types of housing loans, you will be well equipped to understand them and what the real requirements are.
To prevent you from falling prey into a fraudulent scheme, it is vital to be aware of what these are. This is not an exhaustive list, as there are many other kinds of mortgage fraud out there. However, by reading below, you can get an idea of what to expect and what you must do to avoid these attempts to defraud you.
You are Duped into Selling to a Straw Buyer
A straw buyer means using someone to make a purchase on behalf of another who cannot afford the purchase the property themselves. For instance, a poor immigrant with no credit will ask his parents to secure financing on his behalf.
While this is not bad per se, it becomes illegal when the straw buyer buys the property for a person who cannot legally secure financing from many lenders with the same property as the collateral. In most instance, the straw buyer is also unaware of the scheme.
You are Encouraged to Falsify Documents for Your FHA Loan Application
Some lending companies or even agents looking to make a quick and big sale will tell you to pad your income. Making it higher will open up more pricey homes for you because your bigger income says your budget allows you to spend more.
Always remember that giving false information on any of your loan applications is illegal and will get you trouble down the road because you will struggle paying for a property that you cannot truly afford right from the start.
You are Tricked into Signing Something Blank
Whatever you do, do not ever sign a blank document. This means you are agreeing to unknown terms and conditions that someone can insert without your knowledge. Always make sure that you read the fine print before putting your signature into paper.
You are Promised to Be Saved from Foreclosure
Mortgage fraud schemes can also be done not just to home buyers but homeowners, as well. Those who own homes that are facing the thought of foreclosure are often preyed upon by parties who make empty promises of saving them from their debt.
With promises that you can stay in the house, these evil con men will trick you into giving your title to the so-called investor as your collateral. During the closing, the poor homeowner is then evicted from the property, while the savior slash scammer investor pockets the home equity.
You Must Take These Necessary to Protect Yourself
If you come across signs of mortgage fraud, report them to the proper authorities like the state attorney general’s office, the federal trade commission, the department of housing and urban development, and the consumer financial protection bureau.
On top of that, be very careful and filter those that offer you schemes that appear to good to be true. Social media is often a good resource for finding homes in your desired area, but be very wary of ads that offer promos like builder bailouts, short payment plans, and foreclosure rescue.
Most of all, do your research before choosing your mortgage company. With the internet, online reviews and testimonials are a click away.
Also check how long your prospective mortgage company has been in business, ask for the necessary permits, and do check their reputation out with the Better Business Bureau. Typically, it is best to work with someone referred by your family and friends. By doing these steps, you can avoid fraudulent schemes designed to take away your hard-earned money.