Buying a home is one of the most important American Dream for many Americans. Low real estate mortgage rates and record levels of home ownership many people who have never owned a home are now seeking mortgages in an attempt to finance that dream. Sometimes that home ownership dream can come with a cost that goes beyond the real estate mortgage.
Like so many things you can invest your money in obtaining a real estate mortgage too can involve scams. At the least, mortgage fraud and scams could cost you thousands of dollars in interest due to high fees and additional undisclosed cost. The worse case would be losing your home to foreclosure.
According to experts there are three main or common real estate mortgage scams or fraud. They are bait and switch, identity theft through mortgage solicitation and loan flipping. As with most scams the best offense is a good defense. Know your facts and don’t be scared to ask questions.
Bait and switch is a deceptive sales method where a product is advertised at an attractive price (bait) but then the price or product is altered to the advantage of the advertiser (switch). Often fraudulent and illegal the bait and switch tactic sometimes can be performed in a more subtle and technically legal manner. Consumer will often times accept the bait and switch offer due to the investment considerable time and money on a particular purchase. As an example, the bait and switch tactic may be used in mortgage sales when one interest rate is promised, but a higher rate is offered at closing. However not every counter-offer should be considered as a bait and switch.
When an offer for a higher rate is offered at closing then the one first proposed suspending the real estate mortgage may be your best bet – even in light of being a little embarrassed. It is better to be a little embarrassed then to be stuck with a mortgage you can’t afford or don’t want. Keep in mind that you are only stuck with the mortgage after you have signed and the deal is closed. So make sure when you sign that real estate mortgage paperwork that it is what you are looking for.
Getting a mortgage rate quote or a pre-approval you assume that your inquiry with the lender is confidential, right? Wrong! In many cases even unknown to your loan officer key financial information about you and your mortgage needs are being hacked to competing lenders within 24 hours of your credit bureau inquiry. Firms such as Mortgage Inquiry Data Inc. of Coral Springs, Fla., offers lenders nationwide access to your information and everyone in your city who applied for a mortgage loan within the past 24 hours. Another lender could contact these people the next day and offer them a pre-approval for a better real estate mortgage loan with their company.
Another problem is mortgage solicitation by phone, door-to-door or Internet. These scams require you to fill out an application over the phone, fax or via the Internet and in some cases the rates are bogus. But this is not the biggest problem to be concerned with – it is identity theft. Even if the rates are legit the company will have all your information – including your social security number which can lead to identity theft or mortgage fraud.
To protect yourself against real estate mortgage scams of this kind try and avoid solicitations and work with only mortgage lenders you know or whom you already have a relationship. Also do not give out your personal information over unsecured channels. Make sure the company cannot share or sell your information and also be the one to initiate the mortgage inquiry.
Another scam type is loan-flipping. Loan Flipping refers to repeated refinancing of a mortgage loan in a short period of time with little net benefit to the borrower. Loan flipping occurs when a borrower is unable to meet scheduled payments, or repeatedly consolidates other unsecured debts into a new, home-secured loan at the urging of a lender. Lenders who flip loans charge high origination fees with each successive refinancing. They may charge these fees based on the entire amount of the new loan, not on just the incremental amount (if any) added to the loan principal through the refinancing. Also each refinancing may have prepayment penalties that could be financed as part of the total loan amount, adding to the borrower’s debt.
If you are buying a home, refinancing a mortgage or shopping for a home equity loan it is best to work with a reputable lender. Shop around and do some research to find the best deals. Try to avoid giving out any information until after your sure the person or company your dealing with is the right one for you.