Buying a home comes with its challenges. There is so much money, time, effort, and emotion involved. It is important to know the risks and frauds prevailing in the real estate market before you buy a house.
As the top mortgage lenders in Massachusetts, we strive to keep our customers educated and informed on real estate best practices and risks. If you are looking for a home mortgage, you must know about Mortgage Fraud. Yes, it exists!
Let’s understand what it is and how you can save yourself or your knowns from becoming its victim.
What is Mortgage Fraud?
Mortgage fraud is a type of property crime that involves the misrepresentation or omission of information on the loan application, such as income and assets. It can also involve the use of false identities to inflate appraisals and to create false documents to make a mortgage deal a success. Mortgage fraud can be committed by both the borrower and the lender. It is a serious crime that can have severe consequences for both the borrower and lender.
There are main categories of mortgage fraud.
Fraud For Property: The most common type of mortgage fraud is when a borrower lies, overstates his or her income, assets, or employment status. The intent is to make it seem like they are qualified for a home loan when they are not. Mortgage fraud can also involve tampering with asset documentation to qualify for a loan.
Fraud For-Profits: Mortgage lenders commit this fraud by falsifying information on their loan applications. The lender may also conceal vital information from the borrower, such as an inflated interest rate.
Types of Mortgage Fraud
These are the main types of mortgage fraud.
1) Property Flipping: This is when someone buys a house, fixes it up, and sells it for a profit in a short amount of time.
2) Asset Rental: This is when someone rents out their money or other assets intending to get mortgage approval from a lender and then returns it.
3) Equity Skimming: This is when someone takes out home loans using a false identity, income proof, and other documents. They pretend to be someone else obtaining a loan.
4) Foreclosure Scams: It includes convincing homeowners that they need to pay fees to avoid having their homes foreclosed on when there is no such risk of foreclosure.
5) Inflated Appraisal: It can be committed by appraisers, borrowers, or mortgage brokers. The appraiser may inflate the value of the home for personal gain or because they have been bribed by someone involved in the transaction to maximize profits.
Tips To Avoid Mortgage Fraud [For Mortgage Borrowers]
When applying for a mortgage, it is important to make sure that you have done your research and know what you are getting into. The best way to avoid being scammed is to thoroughly read all documents and verify the information. Also, choosing trusted, private mortgage lenders in Massachusetts can help!
- Check the references and referrals of people involved in the mortgage process like mortgage lenders, mortgage consultants, real estate brokers.
- Make sure you have understood what you are signing up for by reading all of the terms and conditions of the final mortgage loan papers/agreements.
- Before purchasing any property, verify its history, ownership and request to see all the original legal documents.
- Hire a trustworthy attorney to check all your important mortgage and property documents. They are well-versed in these documents, procedures, and can guide you the best.
The Bottom Line
The real estate market is a complex and confusing place. If you want to buy a house and apply for a mortgage, you need to do some research before you make your purchase. The process of researching, verifying ownership, choosing the best mortgage lenders, and obtaining documents can be tedious but it can save both time and money in the long run.
At Drew Mortgage Associates, mortgage lenders in Massachusetts, we are completely transparent in our mortgage processes. Our Mortgage Consultants leave no stone unturned to make your mortgage loan process a happy one. You can trust us with your money and property. Get in touch with us to get started with your mortgage process.
