3 Sure Signs of a Mortgage Scam
An estimated 10% of mortgage applications get denied. What should you do if this happens to you? Is a mortgage denial the end of the road?
There are a few reasons that your mortgage application could fall through, ranging from mediocre credit to overpricing on a low-value property. If your mortgage application gets denied, there are other options–but it’s important that you don’t give in to desperation.
When you’re in a tough spot, it’s easy to fall prey to a mortgage scam. You’d be surprised at how prevalant these mortgage scams are.
We’re here to warn you about three mortgage scam signs to look out for so that you can secure a trustworthy mortgage for your home purchase.
1. Bad-Credit Mortgages That Don’t Have Government Funding
Home buyeres with a mediocre or poor credit score may struggle to secure a mortgage from a trustworthy bank or lender. However, they’ll also find no shortage of offers from lenders they’ve never heard of. Should you take the bait when someone offers you a mortgage regardless of your bad credit?
Unless the mortgage is provided or supported by the state or federal government, we don’t recommend it. Most of these bad-credit mortgage lenders are predatory, charging inflated interest rates that could be detrimental to your finances.
2. Reverse Mortgages Advertised as “Income”
What is a reverse mortgage? In the plainest terms, a reverse mortgage refers to a bank or lender giving you the payments for your mortgage, rather than the other way around. The idea is often that rather than trying to pay off your house while you live in it, you’ll pay it off when you sell it.
It’s important to recognize reverse mortgage scams, particularly because reverse mortgages are often geared toward older homeowners. One of the biggest signs of a mortgage scam is when reverse mortgage payments are referred to as “free income” that you’re encouraged to spend or invest.
3. Mortgages for Homes You Can’t Afford
Let’s face it: maybe your mortgage application was denied because you’re trying to purchase a home outside of your range of affordability. Realistically, you want your mortgage payments to consume no more than 28% of your income. If a mortgage would require far more than 28%, you shouldn’t qualify for that mortgage.
What that means is that if any lenders do grant you a mortgage for a house outside of your price range, you should feel suspicious. They know that you won’t have the funds to pay it off, which means that they have a plan to charge you even more for failed payments.
Don’t Fall Prey to a Mortgage Scam in Tough Times
When your initial mortgage application is denied, it’s easy to become flustered and even desperate. However, it’s important to remain vigilant and avoid the mortgage scam that may come your way.
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