Mortgage Loans

How to Avoid Being Scammed During the Mortgage Process

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    • FNBO

      Oct 16 2023

How to Avoid Being Scammed During the Mortgage Process

Purchasing a home can be one of the most exciting times in your life, but it can also come with elements of risk. In recent years, the homebuying process has become a target for scammers who zero in on your mortgage when key paperwork and your down payment are being exchanged. According to the Consumer Finance Protection Bureau, borrowers are most commonly approached with fraudulent activity attempts during closing. However, home-related scams can crop up at any time during the process.

Fortunately, with a little insight, most mortgage scams can be identified and avoided. First, a good rule of thumb is to always work with a reputable lender, such as a longstanding, local bank. Then, as you start your home buying journey, be sure to watch out for the following red flags:

  • Pressure to falsify information.  When filling out your mortgage application, you’ll be asked to provide financial information related to your income and outstanding debts. If you're ever pressured to provide false information, such as a larger income than you earn, it's a definite red flag that you may want to look elsewhere for your mortgage.

    Likewise, if a lender is willing to overlook credit or income deficiencies, this could also be a sign your mortgage provider isn’t legitimate and is trying to scam you. While it is possible to obtain a loan despite past financial hardships, there are steps that need to be taken first to clear your credit history that any reputable lending institution will walk you through.
  • Inconsistent communication channels. Once you’ve applied for a mortgage with a reputable lender, most loan officers will establish consistent channels, such as phone or email, for communication regarding your loan. If you suddenly receive a text from your loan officer for example, when he or she has always used email before, avoid taking action until you’ve confirmed the identity of the sender.
  • Errors or unusual language. Fraudulent email communication often contains spelling errors or unusual syntax. If you receive a communication from your lender that has typos or doesn’t fit the style and tone of previous communication, this should be considered a red flag.
  • Insistence to act fast. Schemers need their victims to respond to requests quickly. This tactic is meant to pressure the homebuyer into acting before they realize that fraud is taking place. A legitimate lender or service provider should never pressure you and will always be willing to explain the actions you are being asked to take.
  • Requests for last minute changes. It’s highly unlikely that your lender will alter the established details of your loan once a closing date has been set. If you are asked to suddenly change wire transfer or check payment details, you should consider it suspicious until proven otherwise. Scammers have been known to send fraudulent emails, directing homebuyers to deposit funds into fake accounts. Since these emails can look legitimate, it’s always best to check with your loan officer about any requested changes. This is another reason it’s advantageous to work with local lenders with whom you have a relationship.

Additional Steps Homebuyers Can Take to Prevent Mortgage Fraud

In addition to learning the various fraud tactics and schemes that scammers use, homebuyers can take additional steps to avoid becoming the victim of fraud during the mortgage process:

  • Understand what happens during the loan process. Ahead of your closing, ask your bank to walk you through the entire home borrowing journey. Be sure you understand what will be required of you each step of the way and who will be asking for which type of information.
  • Heed the power of “two.” Before closing, ask your loan officer to identify two trusted individuals within the bank who can confirm any information that you are asked to provide. If you receive a request from one of these individuals, you can always confirm the authenticity of the communication with one of the other two people before acting. Dual verification will help to safeguard you from fraudulent emails that scammers may send under the name of a trusted mortgage representative.
  • Treat links in emails with suspicion. When you’re contacted by an individual associated with your loan or closing, never click links within the email to provide information. Instead, get in touch with the sender using contact details you know are legitimate. If you don’t have contact details on hand for the requestor, be sure to speak with your loan officer to verify the request before providing sensitive information.
  • Protect confidential information. Never email sensitive information such as bank account or social security numbers. Be sure your lender is providing you with a secure channel for uploading this type of information. Likewise, avoid leaving details such as these on voicemail.

Remember, while there is a potential for fraud during the mortgage process, buyers can protect themselves. Working with local lenders and taking proactive, precautionary measures not only safeguards your finances but ensures that the path to homeownership remains a happy journey.  

The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.