Loan Fraud

Buying or refinancing your home can save you money and get you into the home you have always dreamed of. With so many lenders, appraisers and real estate professionals to help you through the process you can feel at ease with this important decision. However, just as any other important purchase, you will need play smart and avoid traps that many misinformed buyers, first-time purchasers and seniors often fall into. To make sure you don't become a victim of predatory lending or fraud, follow these easy tips:

  • Educate Yourself: Before you even think about buying a home, be sure to attend a homeownership education course offered by the U.S. Department of Housing and Urban Development (HUD)-approved, non-profitcounseling agencies.
  • Shop: Interview several real estate agents before selecting the one that's right for you.
  • Check: Ask for references and check to make sure the agent you are choosing fits your needs.
  • Research: Get information and estimates on the other properties in or around the neighborhood. If something seems off, research it. Don't be tricked into paying too much.
  • Get a Professional: Hire a properly qualified and licensed home inspector to inspect the property before you are agree to buy. Figure out who will be responsible for any repairs, you or the seller, and if you are responsible ask yourself if you can afford it or not.
  • Shop Again: Look around for lenders and compare costs. Beware of pushy lenders who try to steer you in one direction, it may not be the best idea for you.
  • Stand Your Ground: Do not let anyone persuade you to make a false statement on your loan application. These can include:
    • Overstating your income
    • The source of your downpayment
    • Failing to disclose the nature and amount of your debts
    • How long you have been employed.
  • When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. Lying on a mortgage application is fraud and may result in criminal penalties.
  • Do not let anyone convince you to borrow more money you can pay back. Getting behind on your payments can have serious results, including losing your home.
  • Know What You're Signing: Never sign a blank document or a document containing blanks. If you do, someone may fill in the blank after you have signed and you may be bound to terms you did not agree to but because you signed, are obliged to follow. Put a slash or N/A in any blanks to make sure this doesn't happen.
  • Read the Fine Print: Read through everything carefully, all contracts, agreements and any other document you sign.
  • Ask Questions:
    • Make sure to ask about anything you don't understand. This is a big decision and you need to be able to understand exactly what you are agreeing to and what is expected of you.
    • Before signing, have your contract and loan agreement reviewed by an attorney skilled in real estate law, consult with a trusted real estate professional or ask for help from a housing counselor with a HUD-approved agency. If you cannot afford an attorney, take your documents to the HUD-approved housing counseling agency near you to find out if they will review the documents or can refer you to an attorney who will help you for free or at low cost.
  • Be Weary: Be suspicious when the cost of a home improvement goes up if you don't accept the contractor's financing.
  • Be Honest: Make sure you tell the truth about your intentions for the property. For example, if you say you plan to live there but really you plan to rent it out you may be violating federal law and will have to face the consequences.

Return back to the FHA Mortgage home or the FHA Lending Guide.