Slam the Door on Home Loan Scams

 

Owning a home can provide a path to a better quality of life and greater financial security.

You want a lender you can trust. There are lots of them out there. But there are plenty of home loan scammers too, and they’re targeting homebuyers and homeowners across the country.

Let’s look at who’s most at risk, common forms of home loan scams, red flags to watch out for, and things you can do to protect your money and your home.

Predatory lenders most often target:

• First-time homebuyers
• Borrowers with credit problems
• Homeowners who are behind on their bills or facing foreclosure
• People who have lost their job… and others.

Here are three common types of home loan scams:

• In a bait-and-switch scam, an unscrupulous lender will entice you with amazingly low rates and other attractive loan terms. Once you sign on, you’re told you no longer qualify for those terms – with no legitimate explanation of why – or that you must pay a bunch of phony fees and a sky-high interest rate.
• In a collateral scam, a fraudster will try to talk you into using your home as collateral for a loan you can’t afford. They might misrepresent the kind of loan they’re offering. Or they might pressure you into borrowing more than you need, offering a loan based on how much equity you have in your home – but not your ability to pay back the loan.
• In a home improvement loan scam, a crooked contractor will tell you that they can arrange financing through a “friend” or someone they have business dealings with. It could turn out to be a home equity loan with a high interest rate and exorbitant fees. On top of this bad deal, the contractor might do shoddy work or simply skip town with your money.

In all these situations – if you can’t repay the loan, you risk losing your home.

Here are some red flags to watch out for:

• The company offering a loan seeks you out – rather than the other way around.
• They make big promises before they’ve even assessed your finances – like claiming that having a lower credit score won’t affect your ability to get a loan or the interest rate you’ll pay.
• They ask you to lie on a loan application or any other document.
• If you own your home, the lender demands that you sign over the deed.
• They give you vague information about rates, fees, and terms.
• They use high-pressure tactics to urge you to borrow more than you need or can afford to repay.
• Or they won’t give you required loan disclosures, such as your loan estimate and closing disclosure form, or provide copies of documents you’ve signed.

 

Here are some things you can do to stay safe from home loan scams:

• Know your credit score and understand how it will affect your getting a home loan.
• Don’t give out personal info to a lender who contacts you out of the blue.
• If making home improvements, compare your options before accepting financing through your contractor.
• Don’t sign anything that’s vague, incomplete, or makes you uncomfortable.
• Don’t borrow funds that you know you can’t afford to repay.
• And don’t transfer your deed to anyone without consulting an attorney.

 

If you believe you’ve been targeted by a home loan scam, don’t delay:

• Call your financial institution if you’ve made a payment or given out sensitive data.
• If you’ve signed a contract, consult an attorney to determine if it can be rescinded.
• And file a report with your state attorney general’s office, state bank agency, or the Federal Trade Commission.

Remember these tips – and shut out home loan scammers for good.