6 Powerful Tips To Avoid Mortgage Scams

Predatory Lending Activities: Avoid Mortgage Scams When Buying a House

The mortgage loan business is one of the most profitable for banks, specialty companies, and credit unions. This is primarily due to the large amounts of money it takes to purchase a home, so mortgage scams are very prevalent these days. Deceptive people try to take advantage of those looking to buy homes with predatory lending practices that can end up costing homeowners hundreds or even thousands of dollars.

The following are ways to avoid mortgage scams when buying a house:

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1. Do Your Research

One of the best ways to avoid becoming the victim of predatory lending is to do your research well before you even begin looking at houses.

You can accomplish this by doing research and enlisting the help of experts, which will provide you with information about everything. That includes interest rates, closing costs, and required documentation that can help you shop for better deals.

You can use mortgage rates comparative tools to find the best deals for your mortgage. Compare as many offerings as possible until you find a suitable fit.

2. Don't Make Assumptions About Closing Costs

One of the biggest errors homebuyers make is assuming that their closing costs are included in the mortgage. The truth is, most lenders will require you to pay for all of your closing costs, including appraisal fees, title insurance, and loan points.

While these costs are added to your overall loan amount, they can vary significantly from state to state. Therefore, it is crucial to find out the exact amount you will need to bring to closing.

3. Know the Lingo

People who try to engage in predatory lending practices are usually professionals who understand all current mortgage terminology and conditions.

Therefore, it is vital to know all the different types of loans, including market-based ARM loans, balloon-payment mortgages, and piggyback loans.

It is also advisable to understand the different kinds of closing costs, including origination fees, discount points, and lender's title insurance. It prevents you from becoming a victim of the many mortgage scams that exist.

4. Know Your Credit

If you are unsure about your credit scores or how they work in general, it is essential to research how best to raise your credit score by paying bills on time and keeping balances to a minimum.

If you have a bad credit score in general, it will be challenging to find a lender willing to approve your loan without increasing the interest rate. Improve your credit score before applying for a loan to avoid this outcome.

5. Regularly Review Your Mortgage Terms

To avoid getting ripped off by predatory lending practices, you must review your mortgage terms regularly, which is necessary because there are lenders out there who continue to change their rates and fees, which can impact how much you will pay over the life of the loan.

Since this information can be very complicated, it is recommended that consumers work with professionals who can help them understand these changes throughout the process. Understanding the mortgage terms will make you aware of any issues or scams.

6. Avoid Taking out Second Mortgages

Due to the poor economy, many people take out second mortgages to get extra cash to keep up with their regular monthly payments.

Taking out a second mortgage is not advisable because it can lead borrowers directly into the hands of predatory lending practices since they know you need money and will take advantage of your situation.

It is recommended that you do not take out second mortgages unless you need to. Also, do it only with the help of a professional who can provide you with trustworthy information.

Using the tips provided above can help you avoid predatory lending and ensure that you get a fair deal when buying a home.

Review your mortgage terms regularly, shop for lenders, and know all of your options before you buy. It will be easy to get a good deal on your new house without getting ripped off by scammers.

How To Report a Mortgage Scammer

Let your family and friends know about these ways of protecting yourself from mortgage scams by sharing this article. You can also officially report scammers or suspicious real estate activity to the Federal Trade Commission (FTC) below:

Report To The FTC Here

How To Protect Yourself More

If you want to receive – via email – the most notorious scams on a weekly basis, subscribe to our Scam Detector newsletter. You'll receive periodic notifications.

Meanwhile, educate yourself with other mortgage fraud-related articles right under this paragraph, so that you know how to stay safe online. Last but not least, feel free to use the comments section below to expose other real estate scammers.

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