Because homes are a high-value purchase, shopping for one or looking for a refinance deal can bring scammers out of the woodwork. A little knowledge of some common scams will help you protect yourself. Here are the things to look out for.

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Fake Realtor Scams

 

Unlicensed realtors may approach you, trying to earn a commission on a sale. Before you work with a realtor, check their credentials and see if they have any complaints against them on the Department of Commerce and Consumer Affairs website. Also, make sure they are a member of the National Association of Realtors, which requires realtors to follow a code of ethics to protect you as the buyer. They will have the skills and training to negotiate on your behalf and represent your best interests in the sale.

 

Fake Listings

 

Another issue when working with an unlicensed real estate agent is fake listings. You may even get to look inside homes that haven’t been listed and begin paperwork on a mortgage. The goal of this scam is to get you to pay some up-front fees as part of the transaction. Once you pay that money, you’ll never hear from the real estate agent again. In these types of cases, the funds will be in an untraceable location by the time you report the fraudulent transaction.

 

Bait and Switch

 

When lenders promise a low rate or specific terms, but they change when it’s time to close, that could be a bait and switch. Mortgage lenders are required to honor their loan estimates within certain guidelines. If the terms change significantly or the lender adds new fees to the loan, you may need to find a more reputable lender.

 

Mortgage Wire Fraud

 

This insidious scheme involves a scammer contacting you with information about where to wire your down payment and closing costs. Because wire transfer is a standard method of paying these costs, it can be easy to fall prey to this type of scam. Before sending your funds, verify the information with your lender. It can be impossible to get the funds back once you’ve wired them to the scammer.

 

Refinance Fraud

 

Predatory lenders may offer you options to refinance frequently, luring you in with the promise of lower rates or payments. But these loans can add fees and points to your loan, increasing your debt level and lengthening the life of your loan. Refinancing can be a smart choice for many homeowners, but you should ensure it’s a good option for you and that it will give you a financial benefit. And make sure you’re clear about any fees and how and when you will pay them.

 

Foreclosure or Mortgage Relief Scams

 

When you’ve hit financial hardship, it can be easy to fall prey to scammers offering you a way to make it easier to keep your home. But these criminals are actually stealing money from homeowners and, in some cases, getting homeowners to sign over ownership of their houses. If you are experiencing trouble paying your mortgage, working directly with your lender is best. Many mortgage lenders can offer forbearance plans or work with you in other ways to help you keep your home.

 

Other Pitfalls to Avoid

 

Although these aren’t technically scams, other issues related to your mortgage or home purchase could end up costing you.

 

Prepayment penalties

 

When signing your loan documents, make sure you read the fine print to confirm that there are no prepayment penalties for making extra payments, paying the loan off early, or refinancing early. You will want to keep your options open in case you need to refinance or have a huge windfall that you want to use to pay off your home.

 

Overvalued homes

 

There can be a great temptation for unscrupulous loan officers to pay appraisers to inflate the value of a home so that you can get approved for a larger loan. A larger loan may mean a larger commission for your mortgage broker or loan officer, but it can put you into a bad financial position.

 

Low credit score offers

 

Your credit score will affect the terms of your loan, so be wary of a lender that tells you your credit score doesn’t matter. The loan the lender offers is likely to include high fees, have a high interest rate, and provide unfriendly terms. Rather than accepting a loan that may cause you further financial distress, taking time to clean up your credit before you buy a home may better suit your needs.

 

Although scams targeting home buyers and owners are out there, you can protect yourself by working with a legitimate lender, such as HawaiiUSA Federal Credit Union. Learn more about HawaiiUSA’s homebuying options.