Many people who want to buy a home need the help of legitimate sub-prime lenders. Sub-prime lenders are a good way to get money because they give loans to people with bad credit. Predatory lenders, on the other hand, take advantage of people with bad credit by charging them too much in fees, forcing foreclosures, or asking for the title. Avoid these common mortgage scams to keep yourself safe as you look for a home loan.
Interest rates and fees that are too high
When people take out predatory loans, they have to pay a lot of money up front or pay high fees. Some state laws protect consumers by putting limits on interest rates or fees. If you have bad credit, you shouldn't pay more than 8% more than someone with good credit. There are different caps on closing costs, but anything over five points should be looked at with suspicion.
Making foreclosures happen
People can also be given loans so that they will have to go through foreclosures. Most of the time, the monthly payments on these kinds of loans are so high that you can't pay them. They get people to sign up by saying that they will be approved or that they can cash out their equity, but they charge high interest rates. Make sure you can afford the monthly payments on a loan before you agree to it.
Demanding Title
A growing scam has people say they can refinance your mortgage, but what they really do is take your money and title. This scam can be done in many different ways, but usually con artists will try to get in touch with people who have liens on their property or have been sent a notice of foreclosure. They say that if you give them your car title and pay a fee up front, they will solve all of your money problems.
The con artist will then file for bankruptcy in your name. Since a third party started the process, the bankruptcy will be thrown out, but it will still show up on your credit report. Even though they didn't pay off the first mortgage, the scammer will also take your mortgage payments. You might lose your house in the end.
Keep yourself safe
You can avoid these cons by being a smart shopper. Ask more than one lender for a quote before choosing one. If you have any questions, talk to the company that gave you the loan. Lenders who are legit will be glad to explain the process and answer any questions you have.
Once you've chosen a lender, make sure to read every form before you sign it. Federal law says that you have three days after settlement to get out of your mortgage. You will also get all of your money back, except for the fee you paid to apply.
