RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Phil Hobson, Prudential Texas Properties