How To Detect Refinancing Scam Attempts
It is important that you know about refinancing scam attempts and learn how to spot them at early stages. Detecting refinance scams can save you thousands of dollars and can even save you your home. Unfortunately the scammers are shifting their bad ways and techniques all the time, so there might be even now further scams which have not been detected yet. Even though, within the guidelines and tips below you may find enough alert signals to protect yourself from refinance frauds.
Refinance Scams Search For Weak People
Scammers know and understand the weaknesses of human beings, and ride over these weaknesses to rip people off their money. When a person is behind on their mortgage payments, or was recently fired from their job, or have credit card debts piling up their door, they are the perfect victims for a mortgage refinance scam.
The fear of losing home, or drowning into foreclosure, makes people desperate for any ‘life-jacket’ which is thrown at them. And that is exactly what makes them so vulnerable to fall for mortgage or refinance scams. The scam is not preformed by gang tattooed person, on the contrary, you may be approached by a nice person, who talks ‘financial language’, who say they the solution to your problems, and all they ask for is that you ‘trust them’, and everything will be O.K.
Because people in distress will believe anything, and will have a wishful thinking mode, they are not aware to the scam signs, and even if they see them, they prefer to overlook, as they think they do not have any other hope.
When It Comes To Money Issues – Trust No One
The first rule, is to be suspicious. If an offer seems too-good-to-be-true, it probably is! Even when you decide to put your faith in someone, still maintain your survival instincts, ask question, double check basic facts, verify things with second opinion, postpone decisions to reevaluate, never sign anything under pressure. Trust no one, except yourself.
Here are several tips on how to spot refinance scams:
Beware Of The Direct Approach – If someone has picked you, rather than you picked them.. If someone knocks on your door and offers financial help (without you asking for it), like debt consolidation, or to refinance your mortgage in better terms, say “no, thank you” and close your door. You might have been chosen as a victim. The scammers might knock on all the doors in the neighborhood, hoping for one sucker to be naive and invite them in, or accept their offer.
Advance Payments For Refinance ‘Counseling’ Services – Some scams are very simple, they will send you fancy papers, with graphs and financial data, (which they know you can not understand but looks impressive). They may even agree to meet you at your own home, and will arrive in suits and elegant briefcases. At this time you will not be able to spot they are fraud!
Their offer will sound like a dream-come-true, and will be FREE too. Except for some ‘fees’ to ‘other people’ which need to be paid upfront. They will say they have to pay an expert lawyer, a great financial adviser, or to order some files or forms. These fees may add up to hundreds or thousands of dollars, and actually there is NO lawyer, No adviser, and No files ordered. Just a plain simple rip off.
Debt Consolidation Solutions – A common refinance scam is to offer the victim a ‘magic’ solution to all their worries, to gather all the debts owed by the borrower, and consolidate them all into ‘One New Mortgage’. The main problem is that, if you are behind your credit card payments, it will damage your FICO score, but will not risk your home. With the new debt consolidation, the new debt to income ratio may increase, and the home mortgage will be at risk of foreclosure.
Not Revealing All Costs And Fees – This kind of refinancing scam is dangerous, because it can be done by legit lenders and mortgage brokers. They get paid every time you process new mortgage loans with them, so they have an incentive not to disclose all hidden costs (like penalty for mortgage early payoff) even if the new mortgage payments get higher than you can afford. If a mortgage agent tries to influence you to refinance with lower interest rates – Throw him away.
Refinance Documentation Scams – Some scams are intended to con you to sign papers which have blank spaces inside them. Once your signature is at the dotted line, new data will be added at the blanks. Now they have your signature on a legal document agreeing to terms different than mentioned face to face. In some cases you will know it only when it is too late, and the application is processed. If you resent they will threat you by legal actions!
Refinance Application Frauds – Because the broker wants their fees, and you might be eager to refinance your high interest mortgage, the mortgage broker may ask you to write false details (income, salary, employment) in the application form. They may say that it doesn’t matter much, or that it is done ‘by everyone’, or that if there is a problem it can be fixed.. The truth is that you have just been tricked to commit a federal ‘false statement’ crime. Another thing is that the new monthly payments may be beyond your financial reach, in the long run, and you will lose your home.
Refinance Scams Conclusion
The best advise is to be a suspicious customer. Not everyone will want to scam you, but when it comes to refinancing your mortgage if you do not spot the refinance scams you may lose your home if warning signs are ignored. Seek professional home-buyer education information and read more on refinancing with bad credit before you decide how to proceed.
So What Is The Next Step?
If you will do nothing.. don’t expect anything to happen. You must bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.
Lets not forget you are probably paying $500-$1000 extra per year in higher interest rates, and credit payments.
If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education.. Ignorance costs more.