Common Scams and Pitfalls to Avoid When Working With a Mortgage Broker
When purchasing a home, it’s essential to be wary of potential scams that may arise along the way. Mortgage scams are just as prevalent and dangerous as any other kind of fraudulence, so being able to identify them before becoming a victim is paramount.
Before working with a mortgage broker, be sure they are licensed and insured by the U.S. Department of Housing and Urban Development (HUD). Otherwise, you could be vulnerable to fraudulent activity.
If you have any doubts about the credentials of a mortgage relief service provider, reach out to your local HUD-approved state agency for guidance. This should include verifying their license as well as their work history and credentials.
Scammers typically prey on vulnerable individuals, such as seniors with limited incomes and those having difficulty paying their bills. They may promise you help save your home or qualify you for a loan modification program; however, they often charge an upfront fee and never fulfill their promises.
They may suggest making a deal with your lender to reduce your mortgage payment or stop foreclosure proceedings. This is an alarming indication and should be handled immediately.
Mortgage brokers may charge additional fees for their services, but these must be clearly disclosed in the loan documents. Be wary of any company that requests upfront fees without providing a written offer for their products/services and ensure they possess appropriate licenses.
Mortgage scams are the most frequent type of frauds involving unscrupulous lenders or real estate agents. Although this can occur anywhere within the industry, it’s particularly prevalent when home prices are low and prospective homebuyers are desperate for a loan.
Obtaining a mortgage can be an expensive endeavor, and you may need to consult with multiple parties throughout the process. You’ll need to speak with a real estate agent, mortgage lender and escrow or title companies for assistance.
A dishonest real estate agent or mortgage broker may misrepresent the sale price, age or condition of a property. They could also attempt to market a foreclosed home as though it were for sale or rent it out.
Fraudulent mortgage brokers may attempt to take advantage of you by using inaccurate information or fabricating a false credit report, leading to the loss of financing or an unexpectedly higher interest rate than anticipated. These mistakes could leave you without a loan or with more debt than anticipated.
Scammers may target older homeowners with HECM mortgages, or home equity conversion mortgages, which are designed for senior citizens and insured by the Federal Housing Administration. Unfortunately, this could leave them unable to purchase or maintain their desired home and may even lead to foreclosure proceedings.
Mortgage brokers may try to pressure borrowers into refinancing their current loans in an effort to find a better deal. Unfortunately, this practice often leads to more expensive longer-term mortgages with higher interest rates and fees.
