In a previous blog, we talked about mortgage fraud but now we want to talk about how to recognize the signs of mortgage fraud. These are some common things that are encountered when dealing with Mortgage Fraud.
1. Inflated appraisals – An inflated appraisal will help in the scam by raising the value of the home to hide additional fees or other costs.
2. Mortgage brokers who insist that the applicant work with a specific lender – although this is not mortgage fraud it could mean that your broker is working to get you a loan and more money in their pocket(s).
3. High commissions or generous bonuses offered to appraisers and brokers – Unusually high commissions or very generous bonuses will tend to lead you to someone who is falsifying information and not necessarily working in your best interest.
4. Wanting individuals to borrow more than they can truly afford – by borrowing more money than you can afford, you will be putting more money at risk for you, not them. By borrowing more money than you can afford, you will be more likely to default or fall behind on the mortgage.
5. Promises of getting high profits in a very short period of time. Any promise of high profits is generally a warning sign due to the unexpected nature of the housing market. Claims that you will get large profits are enticing you to make the deal. This may be and has been the downfall of many home buyers.
6. Any false information for the purpose of obtaining a mortgage. This is pretty self explanatory but remember getting the loan on your terms is best. Remember “Honesty is your best policy”.
7. Failure of any lender to furnish copies of every document that you sign. Some of the papers requiring your signature could be used to commit these scams and also could be used for identity theft.
8. A broker or lender that is asking for your signature on any document that is missing information or is blank. Never sign anything that is missing information or is blank and get copies of everything that you sign.
You can avoid mortgage fraud and other shady practices by keeping certain things in mind. Don’t purchase a loan that is disguised as a refinance. Get referrals for all of your mortgage professionals. Check out the licenses of the mortgage professionals that you are considering using. Find out if the property your interested in has been sold numerous times in a very short period of time. Make sure that you understand the terms of your mortgage and have an attorney review the contract. Check out the neighborhood and tax assessments to verify the true value of the property. Finally stay away from online mortgage websites promising to raise your credit rating for a fee.
When you have found the home you want to purchase find a qualified appraiser (on your own) and check out that appraiser’s accuracy. Have that individual do an appraisal on the home you want to buy and compare that to the numbers that you see in your loan documentation. Using a good online resource for getting mortgage help will help you in the long run. They can provide you with mortgage quotes, rates, history of mortgage rates, payment and affordability calculators and most importantly a list of reputable mortgage lenders.