The 5 Most Common Mortgage Scams and How to Avoid Them
Are you thinking about buying a home? Or maybe you’re already in the process of applying for a mortgage. Either way, you need to be aware of the dangers of mortgage scams.
Mortgage scams are on the rise, and if you’re not careful, you could be the next victim. There are several different types of scams, but all of them have one goal in common-to steal your money.
Read on for information about the five most common mortgage scams, and learn how to avoid them.
- Predatory Lending
Predatory lending is a type of scam where lenders trick borrowers into taking out loans that they can’t afford. The loans often have high-interest rates and fees, and the borrowers are often promised that they can refinance later to get a better deal.
Unfortunately, many of these borrowers end up defaulting on their loans, and the lenders end up making a profit off of their misfortune.
If you’re thinking about taking out a loan, make sure that you understand all of the terms and conditions. Don’t sign anything unless you’re sure that you can afford the loan. And never agree to anything that you don’t fully understand.
- Mortgage Fraud
Mortgage fraud is another type of mortgage scam where borrowers are tricked into taking out loans that they can’t afford. In some cases, the borrower may not even know that they’re taking out a loan.
In other cases, the borrower may be promised a low-interest rate, but then they’re hit with hidden fees and a higher interest rate when they try to refinance.
Mortgage fraud can be difficult to spot, so it’s important to be cautious when you’re applying for a mortgage. Make sure that you understand all of the terms and conditions before you sign anything. Always be sure to understand what you’re agreeing to before taking any actions.
- Loan Modification Scams
Loan modification scams are becoming more common as people struggle to keep up with their mortgage payments. In this type of scam, a borrower is promised that their interest rate will be lowered or their mortgage terms will be improved if they make a lump sum payment.
In reality, the borrower often ends up paying more money than they would have if they had just kept making their mortgage payments. And in some cases, the borrower may not even receive the promised loan modification.
If you’re struggling to make your mortgage payments, there are legitimate programs that can help you. But be wary of anyone who promises to help you modify your loan in exchange for an upfront fee.
- Equity Skimming
Equity skimming is a type of mortgage scam where a borrower takes out a home equity loan or line of credit but then doesn’t make the payments. The borrower usually does this so that they can sell the property and pocket the proceeds.
In some cases, the borrower may not even own the property. They may have simply taken out a loan in someone else’s name and then skipped town.
If you’re thinking about taking out a home equity loan or line of credit, make sure that you understand all of the terms and conditions. And be sure to make your payments on time to avoid losing your home.
- Phishing Scams
Phishing scams are becoming more common as people search for mortgage information online. In this type of scam, a borrower is contacted by someone who claims to be from their mortgage company.
The borrower is then asked to provide personal information, such as their social security number or bank account information. Once the borrower provides this information, the scammer can then use it to steal their identity or commit fraud.
If you’re contacted by someone who claims to be from your mortgage company, never give out any personal information. And if you’re unsure whether or not the person is legitimate, contact your mortgage company directly to verify.
By being aware of these common mortgage scams, you can protect yourself and your finances. If you have any concerns about a loan that you’re considering, be sure to speak with a mortgage professional to get more information. And always remember to never sign anything that you don’t fully understand.