With all the complications involved in applying for a mortgage, it is probably not too surprising that there are many pitfalls to avoid. With such a large investment at stake through a mortgage, as well as the amount of time and research that is involved in acquiring one, it can be very easy to overlook a small detail or miscalculate a figure. There are some other hazards to watch out for when applying for a mortgage, however. Many laws that are parts of real estate loans and mortgages are not always clear to the average homebuyer/seller, and without this knowledge, they run the risk of potentially becoming a victim of, or guilty of Mortgage Fraud or real Estate Fraud.
The basic definition of these two terms is any false statement made on a loan application by one or more of the parties involved, in order to secure inaccurate rates for the applicant. For example, if you put a false statement about your yearly income on a loan application to qualify for a better rate, you have committed loan fraud. This is a very broad, simple definition, as real estate fraud schemes can take many shapes and forms, and can be perpetrated by anyone involved in the loan process. As stated above, one of the largest problems about mortgage fraud and real estate fraud is the fact that many people do not even know they are committing it since they trust other people to know the facts that they themselves should.
Aside from just the homeowner/buyer, other people in the home buying process can be involved in mortgage and real estate loan fraud scams. As in any business, there are always a few dishonest people who are willing to take advantage of others in order to make a quick profit. Lenders can be involved in these dishonest acts. Some lenders will say that they can get you a better rate if you agree to exaggerate information on your real estate or mortgage loan application. False property appraisals are also a way fraud can be committed, as some appraisers will offer you an inaccurate estimate in order to help you get a higher loan. Another area that requires attention is gift money vs. loan money. Make sure you know how the laws regarding gift money work or you could find yourself facing charges for real estate fraud.
This may leave you wondering if it is at all safe to apply for a mortgage without making some illegal mistake, and this becomes the main point of the article. It is up to you, the homeowner/buyer, to make sure that you are informed, and do not become a victim of a real estate or mortgage fraud scam. There are many people who will help you on the way to buying your house, but this does not in any way mean that you can rely on them to do stuff that you’re responsible for. It is up to you to do all the research involved, to read through all the paperwork and fine print, and know what every signature you provide means. Make sure you trust the lenders you are working with, and if you have any questions about the application process; ask. If a lender encourages you to provide false information on any document, refuse and take your business elsewhere.