Avoiding Lender Scams

One of the unfortunate side effects of being a homeowner is the fact that it makes you the target of a multitude of scam artists. Sadly, some of these scams are pulled off by seemingly reputable lending institutions, which makes it even more difficult to know who you can trust and who you cannot. Fortunately, if you are aware of these scams and you proceed with caution, you can avoid being taken advantage. Here are a few of the more popular scams being used against homeowners today.

The “You Can Afford This” Equity Scam

With this scam, the lender actually encourages you to lie on your loan application and to stretch your budget further than you can afford. By encouraging you to claim a higher income, you can get approved for the loan. Of course, this puts you at risk of defaulting on the loan, at which time the lender forecloses on your home. How to Avoid This Scam: Never lie on your application or take on an equity loan you cannot afford.

The “These Benefits Will Really Help” Credit Insurance

After applying for and being approved for a home equity loan, the lender provides you with a few unexpected papers at the closing. These papers are meant to provide you with extra “benefits” such as credit insurance. Of course, these extra benefits drive up the cost of your loan and, when in the midst of signing so many papers during the closing, you might not even notice what you have agreed to. How to Avoid This Scam: Check all paperwork carefully at the closing and don’t get bullied into signing papers you don’t agree with.

The “You Can Refinance It Again” Scam

This scam, which is often referred to as loan flipping, takes place when a lender encourages you to repeatedly refinance your loan. Of course, each time you refinance your loan, the lender adds on additional fees. The fees are added to your total loan amount, so you may not even realize you are actually putting yourself in more debt. How to Avoid This Scam: Only refinance your home if it will help reduce your overall debt or if you are truly in a financial bind and have no other options.

The “We’ll Just Confuse You Into Paying More” Scam

Some lending institutions simply send you so many account statements with confusing information that you are never quite sure what you are paying. This tactic is referred to as deceptive loan servicing and may include increasing your house payments for no good reason or adding on additional fees that you don’t understand. How to Avoid This Scam: Never take additional fees or payment increases lightly. Demand to have the costs explained to you and get a second opinion if you aren’t certain the costs are on the up and up.

About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.