American Dream

The American Dream of buying a home is a top priority now as mortgage rates are low. But with record levels of home ownership, many people who never dreamed such a dream are seeking mortgages in an attempt to finance that dream. But sometimes the dream of home ownership can come with a cost. The key is to arm oneself with information. Educate yourself as much as possible about the process. With mortgages, don't be afraid to ask lots of questions; "If something looks too good to be true, it probably is."

Mortgage scams are on the rise and typically target people who have bad credit, overextended or are in need of financial relief. Guard yourself against con artists with a little background on common mortgage scams. Mortgage scares and fraud could cost you thousands of dollars in high fees, high interest and at the worst, you could lose your home to foreclosure. With record numbers of individuals seeking home loans these days, it’s no surprise that scam artists have developed new ways to separate borrowers from their money.

Experts say that some common types of mortgage scares are fraud--bait-and-switch, identity theft through mortgage solicitation and loan-flipping. With information, preparation and a willingness to say no, experts say there are ways to guard against those scams and fraud.

1. Make sure that you understand all the terms, conditions, rates, fees and extras associated with your loan. Understand how much the loan is costing you--interest included--over the entire life of the loan. If someone is trying to force you to make a decision, that may be a signal that something could be wrong. Even if you've reached the closing table and the rates are not right--if the loan officer baited you with a low rate and then switched you to a higher one--it's not out of the ordinary to stop the closing on the spot. You will be stuck with that rate and term only after you sign the mortgage documents. So shop around to see if there are lower rates available. Don't let a lender pressure you into making a decision.

2. Another type of scare is loan-flipping, which occurs after you've secured a loan and made a few payments. The lender tries to get you to take out a bigger loan if you agree to refinance. You may end up paying extra refinancing charges and saddled with debt you cannot afford.

3. Another problem to be aware of is mortgage solicitations by phone, door-to-door or Internet. Generally, these scams require you to fill out an application over the phone, fax or via the Internet, and the rates are sometimes bogus. Even if the rates are legit, the company still has all of your information, including your name, address and social security number, which can lead to identity theft or mortgage fraud. Get mortgages that you initiate, avoid giving personal information over unsecured channels and make sure the company cannot share or sell your information. Thus, try to avoid solicitations and work with mortgage lenders with whom you already have a relationship.

4. If you’re required to pay large fees in advance before attending a Home-Buying Seminars, chances are the service is not legitimate. Consult the Better Business Bureau before taking action. You’ve seen ads in the newspaper (and on bus benches) for those home-buying seminars or programs catering to people with less-than-perfect credit. If you’re considering such services, check out their fee structure first, and make sure you’re not buying into a scam.

5. Be sure you never sign paperwork with blank spaces or allow someone to rush you through the process. The homeowners sign away the title to their homes because they were confused by paperwork. With any decision involving your finances, get everything in writing and insist on reading the documents carefully before signing. Ask questions and make sure you understand the answers.

6. If you’re struggling with mortgage payments or in foreclosure. A business or individual offers to buy the property and sell it back to you, once you get your finances back in shape. The process is called “re-conveyance,” and there are legitimate companies offering these services. If you encounter a scammer, however, you could find yourself unable to repurchase your home. So consult a real estate attorney before being a victim of the re-conveyance racket.

7. In this type of scam, the homeowner is approached by a contractor offering home renovations at an affordable price. When the homeowner protests that they can’t afford the work, the contractor suggests he arrange financing through a lender acquaintance. The homeowner agrees, the contractor commences work, and then presents the homeowner with a bunch of paperwork. Some of the papers may be blank or incomplete and the contractor threatens to walk off the job unless they are signed immediately. After the fact, the homeowner discovers they’ve applied for a home equity loan with high rates and accompanying fees. At this point, the contractor has all the leverage because the work is underway and he’s probably received a kick-back from the unscrupulous lender.

8. If a member of your family is considering a reverse mortgage, they should protect themselves against scams specifically targeting reverse mortgages and speak with a HUD-approved counselor first. Make sure they get at least three separate offers in writing, and that they understand the terms and conditions before signing. Remember, borrowers generally have up to three business days in which they can cancel a loan document.

The Fannie Mae Foundation, has published a series of home-buying guides, and the key to borrow only the amount you need. Make sure that the payments are affordable based on your current income--not the raise or bonus you expect to get in three months and not the marriage you expect will someday boost your income. Whether you are buying a home, refinancing your mortgage, or shopping for a home equity loan, it pays to work with a reputable lender.

For more information about home-buying, go to www.fanniemaefoundation.org or call 800-688-HOME.

By Vini Shah, Branch Manager – Apex Lending Inc. – President NAPMW San Antonio, TX – National Association Professional Mortgage Women, SABOR Education Committee Member, SABOR Equal Opportunity Housing Vice-chairman.

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The American Dream by Vini Shah