Beware of Mortgage Scams: #1 - Reel Them In

With mortgage rates that have not been seen in years comes new and improved mortgage scams. In this 5-part series, we will talk about mortgage scams to beware of as you head out into the sea of lenders in search of a good mortgage rate for your next (or first) home.

#1 – Reel Them In

This mortgage scam is one that has been around, in every service industry, for as long as scams have been around.  In this “Reel Them In” scam, the prospective buyer is reeled in with a promise of an exceptional deal.  It may be a great incentive, a low monthly payment, skipping payments, or even no points.

The prospective buyer gets excited about the rate, gets everything ready for the loan application, jumps through all the hoops put in front of him, and supplies an endless stream of paperwork.  Once everything is FINALLY to the lender, the lender states that the terms have changed or the rates are suddenly unavailable and offers a typically much less desirable deal. This deal, incidentally, will usually work out better for the lender.

In most cases, the prospective buyer will go ahead with the loan because they feel either there are no other options or they have put so much work into submitting the application and its accompanying forms that they don’t want to start over. The lender is hoping for this.

Beware of these types of mortgage scams. Make sure you get deals in writing, understand the terms, know of deadline dates, and go with a recommended lender.  This can help you ensure you are working with a reputable lender and are truly getting the deal.

Read about more scams in our ‘Beware of Mortgage Scams’ series.