Home Mortgage and Refinance Scams to Watch Out For
With interest rates being as low as they are, applying for a mortgage or refinancing are attractive options for many. Unfortunately, there many scams geared towards homeowners and their financing issues.
Here are some of the most common refinancing and mortgage related scams to watch for.
House Flipping & Inflated Appraisals
House flipping is a common practice and often works out well for both parties. In the scamming world it is seen as a way to make profits quickly.
A person will invest in an old or run down home. They have a team of people that are working with them (appraiser and buyer’s agent) to get the home over appraised to a high value. They then sell this to an unsuspecting buyer.
All those involved get a portion of the over inflated profits. The buyer however, is left with a loan on a home that is over appraised and could have problems due to lack of concern that the updates are being done properly or up to code.
Bonus! Here’s a helpful article by Bill Gassett (Top Realtor in Ma) who provides more information about house flipping scammers.
Extra Fees and Costs
Companies that propose to help home owners refinance their mortgage and then require upfront payment for fees are most likely scamming. The homeowner pays these fees to the scamming company and, sadly the company takes the fees and runs while no refinance was ever completed! The home owner loses their hard-earned money.
Last Minute Interest Rate Changes
This strategy happens by scammers who lure in home owners with a mortgage or refinance at a low rate. The home owners go through the normal process of a refinance and then once closing occurs they are told the interest rate will be much higher than expected.
Surprisingly, some home owners will still go through with the mortgage because of fear they may never get a better rate from another company.
Scammers also target those in poor financial situations who are close to foreclosure. The scamming company proposes to the home owner that they will take temporary ownership of your home.
The home owner is to make their payments to said company as if they were renting the house from them. The scammer claims later on the home owner can buy the home back.
The scammer pockets the payments and the homeowner has no clue that their current mortgage was never bought by the company and therefore their original mortgage has been left unpaid. This results in foreclosure and the owner loses their home.
Homeowners Can Prevent Scams
- Do not pay any costs upfront as most reputable lenders will not require this.
- Do not transfer the title over to any other company claiming to make payments for you.
- Read the fine print on any and all documents signed.
- Research the company thoroughly and always maintain good communication with the current lender to ensure they too are in the know about who is taking over the loan.
- If suffering from financial hardships oftentimes the best strategy is to simply talk with the lender and they will often help you come up with a way to remedy the solution.
More Mortgage & Refinance Resources
- What You Need to Know About Getting a Mortgage – Paul Sian
- Understanding the Time Needed to Close a Mortgage Loan – Luke Skar
- Refinancing: 3 Ways to Boost Your Value – Benchmark Mortgage
- Why More Homeowners are Refinancing to Shorten Their Terms – Total Mortgage
- 5 Mortgage Scams – Bankrate
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