Top 10 Common Mortgage Scams and How to Avoid Them Like a Pro

1. Top 10 Common Mortgage Scams and How to Avoid Them Like a Pro Mortgage scams are more common than you might think—and they can be devastating. From fake loan offers to shady refinancing deals, scammers use clever tricks to steal your money, personal information, or even your home. These frauds prey on homeowners and borrowers, especially those in financial stress or unfamiliar with the mortgage process. In this guide, we’ll break down the 10 most common mortgage scams and show you how to spot and avoid them like a pro. Whether you're refinancing or just exploring mortgage options, being informed is your best defense. What is Mortgage Fraud? Mortgage fraud happens when someone lies or hides important facts during the mortgage process to gain money or property. It can be done by shady lenders, fake agents, or even borrowers. It’s considered a crime under Financial Institution Fraud (FIF). There are two main types: ● Fraud for profit – Usually done by professionals like lenders or brokers for money. ● Fraud for housing – Done by borrowers to get a loan or a better deal that they don’t qualify for. Let’s go over the scams you need to watch out for.

2. 1. Mortgage Wire Fraud This is one of the most dangerous scams. Hackers pose as your real estate agent or lender and send you fake wire instructions. If you send money to the wrong account, it may never come back. How to avoid it: Always call your trusted mortgage advisor near me to confirm wire instructions before sending any funds. Double-check email addresses and look for typos or strange messages. 2. Foreclosure Rescue Scams Scammers often target people who are struggling to pay their mortgage. They promise to “save” your home or modify your loan in exchange for upfront fees. But once they get paid, they disappear. How to avoid it: If you need help, talk to your lender directly or connect with a HUD-approved housing counselor. Avoid anyone who asks for money up front for foreclosure help or loan modification fraud services. 3. Reverse Mortgage Scams This scam targets seniors aged 62 and above. Scammers trick them into applying for a reverse mortgage and take most of the payout by inflating the property’s value or stealing their identity. How to avoid it: Reverse mortgages are not free government benefits. They are loans. Always talk to a licensed advisor and never sign anything without understanding the terms. 4. Bait-and-Switch Tactics You’re shown a very low interest rate or amazing loan terms to hook you in. But later, the lender changes the terms, saying you didn’t qualify. Now, you’re stuck with worse conditions. How to avoid it: Ask for a written Loan Estimate and make sure the lender honors it. Compare offers from the best home loan providers and get everything in writing.

3. 5. Fake Real Estate Agents Some scammers pretend to be agents. They might show fake listings, rent out foreclosed homes, or use fake licenses to gain your trust. How to avoid it: Always verify your agent’s license with your state’s real estate department. Avoid cash payments and never share personal documents until you’re sure the person is legit. 6. Loan Flipping In this scam, the lender convinces you to refinance again and again, each time adding fees and costs. This can trap you in endless debt with no benefit to you. How to avoid it: Be cautious if someone pushes you to refinance too often. Look at the full cost of each refinance, including fees and the loan term. 7. Overvalued Property Scams Some sellers or agents work with appraisers to falsely inflate a home’s value. You end up paying more than it’s worth, and your loan could be underwater before you even move in. How to avoid it: Always get an independent appraisal and research property prices in the area. Use a home buying safety checklist to cover your steps. 8. Fake Loan Modifications Scammers often pretend to be lawyers or government agents and say they can help lower your payments or stop foreclosure, for a fee. How to avoid it: Only your lender can truly modify your loan terms. Don’t trust any third party asking for upfront fees without proof of credentials. Verify any service through HUD. 9. Prepayment Penalty Traps Some loans hide penalties in the fine print if you pay off your loan early or refinance. These can cost you thousands.

4. How to avoid it: Read your loan terms carefully. Ask your lender about prepayment penalties before you apply for home loans or sign anything. 10. “No Credit Score? No Problem!” Scam Every lender uses your credit score to decide your mortgage rate. If someone tells you it doesn’t matter, that’s a red flag. How to avoid it: Check your credit score yourself and ask how it affects your rate. Use reputable lenders and avoid offers that sound too good to be true. How to Report Mortgage Fraud If you think you’ve been scammed, don’t stay silent. Reporting mortgage fraud helps protect others and may help you recover your losses. Steps to take: 1. Contact your mortgage provider or lender immediately. 2. Speak with a HUD-approved housing counselor. 3. Report the scam to: ○ The FBI ○ Consumer Financial Protection Bureau (CFPB) ○ Federal Trade Commission (FTC) ○ State Attorney General or Real Estate Commission Final Thoughts Mortgage scams are always changing. Scammers take advantage of new trends and economic issues to trick people. Being informed is your best defense. Before you make any move, research thoroughly. Choose the best home loan providers, and refer a home buying safety checklist.

5. If you’re ready to start your journey toward homeownership, make sure you work with reliable professionals and protect yourself at every step. Avoid shortcuts, read the fine print, and never pay for promises that seem too good to be true.