There might be times when it seems that a small lie won’t hurt anyone. You say your hair is naturally brunette or blonde when it’s dyed, for example. There’s one time when lying is an absolute don’t, and that’s when you’re applying for a mortgage. Mortgage fraud is an issue that is taken very seriously by the authorities. The penalty for fraud is up to 30 years in jail, a million dollar fine or both, according to the FBI.
Types of fraud
As a borrower, there are a few ways you can commit mortgage fraud, either inadvertently or intentionally. For example, you might say you make slightly more per year than you really do. You might say you’ll be living in the home when your plan is really to rent it out. You can also commit fraud by lying about your employment or about the source of your down payment. If you are taking out a second mortgage to cover the down payment, you need to tell the lender that.
It’s possible for a lender to commit fraud, too. In some cases, the lender might let the borrower know of the fraud. In others, the borrower can be completely in the dark and only find out when there’s a major issue with the home or mortgage, such as a lien on the property. One way a lender can commit fraud is by asking you to sign an application or document without filling in all the information. At a later point, the lender might add information that is inaccurate — for example, inflating the price of the home or inflating your income.
Avoid being a victim of fraud
One of the best ways to avoid being a victim of fraud is to find a lender with a strong, reliable reputation. Another way to avoid being a fraud victim is not to inadvertently or intentionally falsify any information on your mortgage application. Read over the document several times before signing and submitting it to verify that information. If you don’t understand something on the application or other document, ask what it means. Only sign once you fully understand the terms.
Mortgage fraud can happen after you’ve gotten the loan, too. If a company claiming to be a lender calls you out of the blue and offers to help you avoid foreclosure, be extra careful. Some companies get people to sign over their homes, at which point the company sells the house to another person.
Before you go to get prequalifed and start looking for homes, find out as much as you can about the lender, your agent and the area. The more you know, the better you’ll be able to avoid fraud.
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