Buying a home is a big financial commitment, and getting a home loan or mortgage is often the key to making it happen. Unfortunately, scammers take advantage of homebuyers and homeowners by offering fraudulent mortgage deals that can lead to financial losses or even foreclosure.
Knowing how to spot these scams and protect yourself can save you from serious trouble. At Sprint Funding, we provide honest, transparent mortgage solutions to help you secure the right loan without the risk of fraud.
Let’s make your home financing journey safe and stress-free—contact us today!
Foreclosure Rescue Scams
Homeowners struggling with payments are often targeted by scammers promising foreclosure rescue services to stop foreclosure. These fraudsters pose as foreclosure relief services, claiming they can negotiate with the lender or reduce payments for a fee.
In reality, they take the money and disappear or advise homeowners to stop making payments, making the situation worse.
How to Avoid It:
Never pay upfront fees for mortgage relief services. Legitimate assistance programs do not require payment in advance.
- Work directly with your lender if you are facing foreclosure. Many lenders offer loan modification programs.
- Verify companies offering foreclosure assistance with the Consumer Financial Protection Bureau (CFPB) or your state’s attorney general.
- Be aware that federal law prohibits mortgage relief service providers from charging fees before obtaining mortgage assistance.
2. Loan Modification Scams
These scams target homeowners struggling to keep up with mortgage payments by offering fraudulent mortgage assistance services. Fraudsters promise to modify your loan, lower your payments, or even eliminate debt altogether—for a fee.
Some go as far as asking homeowners to sign over their property under false promises.
How to Avoid It:
- If someone guarantees a loan modification, be cautious. No one can promise results.
- Contact HUD-approved housing counselors for legitimate assistance.
- Never transfer homeownership to another party unless advised by a trusted legal professional.
- Contact your mortgage servicer directly if you are having trouble paying your mortgage. They can provide legitimate options for assistance.
3. Bait-and-Switch Scams
Some fraudulent lenders advertise loans with low interest rates or no fees, only to change the terms at the last minute. Borrowers are pressured into signing loan documents with much higher rates and hidden fees, often leaving them in an unaffordable situation.
How to Avoid It:
- Read every loan document carefully before signing. If anything looks different from what was promised, do not proceed.
- Compare multiple loan offers to understand what is reasonable.
- Avoid lenders who rush you to sign without time for review.
4. Equity Stripping Scams
Scammers convince homeowners to refinance their mortgages multiple times, pulling out home equity while charging high fees and interest rates. Over time, the homeowner is left with little or no equity, increasing the risk of entering the foreclosure process.
How to Avoid It:
- Be cautious of lenders pushing frequent refinancing.
- Only refinance when it offers clear financial benefits, such as a lower rate or shorter term.
- Work with reputable mortgage professionals and compare terms with multiple lenders.
5. Fake Mortgage Lenders
Some fraudsters create fake mortgage lender companies, offering loans with too-good-to-be-true rates. They collect personal information and application fees, then disappear—leaving victims without a loan and at risk of identity theft.
How to Avoid It:
- Check if the lender is licensed through the Nationwide Multistate Licensing System (NMLS).
- Avoid lenders who do not have a physical address or verifiable contact information.
- Be cautious of lenders who only communicate via email or phone without in-person meetings.
6. Wire Fraud and Phishing Scams
This scam targets homebuyers during the closing process, often involving large sums of money for closing costs. Criminals hack into email accounts of real estate agents or lenders and send fake wiring instructions. Buyers then unknowingly transfer large sums of money to fraudulent accounts.
How to Avoid It:
- Always verify wire instructions by calling your lender or title company directly.
- Be suspicious of last-minute wiring changes.
- Use encrypted email services and enable multi-factor authentication for added security.
7. Reverse Mortgage Scams
Seniors are often targeted with fraudulent reverse mortgage offers, where scammers either steal equity from their homes or charge high fees for unnecessary services, making it difficult to keep their mortgage current. Some even trick seniors into taking out reverse mortgages and then steal the proceeds.
How to Avoid It:
- Only apply for reverse mortgages through HUD-approved lenders.
- Never sign documents you don’t fully understand.
- Consult a trusted financial advisor before making any decisions.
8. Rent-to-Own Scams
These scams target buyers who can’t qualify for a mortgage and are having trouble paying rent. Fraudsters promise a rent-to-own deal, requiring upfront payments or inflated rent in exchange for homeownership later.
In many cases, the scammer disappears, or the buyer never actually gains ownership.
How to Avoid It:
- Research the property and ensure the seller actually owns it.
- Get all agreements in writing and reviewed by a real estate attorney.
- Be cautious of any deal that requires large upfront payments.
How to Protect Yourself from Mortgage Scams
Work with Licensed Professionals: Always verify the credentials of lenders, real estate agents, and loan officers before engaging in any transaction.
- Be Skeptical of Too-Good-to-Be-True Offers: If a deal sounds unrealistic, it probably is.
- Read Everything Before Signing: Do not sign any document without fully understanding the terms.
- Report Suspicious Activity: If you suspect a scam, report it to the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB), or your state’s attorney general.
- Ensure your mortgage payment does not exceed 28% of your gross monthly income to maintain financial stability.
Stay Informed and Protect Your Investment
Mortgage scams can put your home, finances, and identity at risk. Staying informed and working with a trusted lender is the best way to avoid costly mistakes. Maintaining a healthy lifestyle can also contribute to better financial decision-making and overall well-being.
At Sprint Funding, we offer transparent and reliable mortgage solutions tailored to your needs. Whether you’re buying, refinancing, or looking for specialized loan options, our team is here to guide you every step of the way.
Get started with a trusted mortgage partner—call us today!