Ah, spring – when people buy homes, find new places to rent, write checks, sign complex legal documents and – too often – fall victim to real estate fraud. That's why it is so important to know how to protect yourself from fraud before you sign along the dotted line on a lease or a closing document.
Based on the cases we're seeing at Freddie Mac's Financial Fraud Investigation Unit, these are the recommendations our investigators have for spring home shoppers.
First, never sign a mortgage application until you are certain the blanks are filled in correctly. Leaving blanks on a signed document makes it easy for a fraudster to change key information about you (think income and assets) or the amount you are borrowing, the interest rate you agree to pay, or even whether the interest rate is fixed for the life of the loan or will adjust. The best way to protect yourself from a loan you can't afford is to make sure the loan application is complete and accurate before you sign it.
Similarly, resist the temptation to go along with suggestions to exaggerate your income, length of employment or any other information someone says will help get your loan approved.
And keep your loan officer up to date on job changes, new debts or other changes that happened since you first applied for the mortgage. This will ensure you still qualify for a loan you can afford to repay and there are no inadvertent misstatements of fact on your loan application.
Borrowers must sign a legal affidavit at closing attesting to the loan application's truth and accuracy. Even inadvertent misstatements count as misrepresentations in the loan application.
Next, meet your loan officer in a secure location, like your home or their place of business. Don't give your mortgage application in, say, a coffee shop or food court where a stranger with a cell phone could take a picture of your bank statement, tax returns, or income statements. This is an important tip for protecting yourself from identify theft.
Beware of ads promising to erase bad credit records and/or create new credit identities so people can get new credit cards or mortgage loans and start spending again. That's an appealing pitch to someone eager to buy a home. But rebuilding credit takes time and patience, a good household budget, and paying your bills on time. People who fall prey to credit repair scams lose their upfront fees, don't improve their credit, and sometimes run afoul of the law.
Not planning to buy a home? You may still be at risk because some fraudsters make a business of cheating renters out of security deposits and rent check with online ads for properties they don't own. Before you write a check, take the time to verify what the ad says. You can spot suspicious online rental ads by talking to real estate agents and local governments, searching the Internet, and most importantly, seeing the property for yourself.
For more information about buying and renting a home responsibly, visit MyHome by Freddie MacSM.
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