Moving scams extend to home buying. In fact, some of the most serious scams out there involve mortgages.
Mortgage fraud is an umbrella term that includes dozens of different types of scams and illegal activity. Prospective home buyers need to be very concerned about one particular type: bad mortgages.
Mortgages are essentially loans, which need to be repaid. If they aren’t repaid, the lender can repossess the home. Scammers take advantage of this situation by offering bad mortgages — mortgages that they know the buyer won’t be able to pay back. Then, when the buyer fails to pay back the loan, the lender gets to repossess the home as sell it. Depending on the value of the home and how long the buyer takes to “default” on the mortgage, the lender can make a lot of money.
Bad mortgages range from the overtly illegal to legal mortgages with legitimate banks. The common theme is that the buyer is getting led astray.
Common bad mortgages include:
- Low monthly payments early on followed by higher “balloon” payments.
- Extremely high interest rates.
- Large down payments that are required.
- Any mortgage that simply does not fit your budget.
If you want to avoid paying tens of thousands of dollars only to lose your home, we suggest that you contact a lawyer or an accountant before signing off on any mortgage. Make sure you budget what you will have to pay each month, and determine whether you will be able to do that.