Mortgage scams are more common than you would think. And, the FBI takes mortgage scams very seriously. What can become a problem for new home buyers is that sellers, banks and real estate agents can easily talk you into being part of a scam without you realizing it. That's why we want to give you an overview of common mortgage scams so you can make sure you don't accidentally break the law and go to jail as a scam artist.
• Kickbacks. Sometimes a seller will offer to hand you cash after closing in order to sweeten the deal. This is against the law. All transactions must be disclosed to your bank.
• Hidden second mortgages. If you can't afford a down payment, a seller will often offer to give you a silent loan for it. If your lender doesn't know about it, that's considered a scam.
• False freelance income. If you work freelance, it can be hard to verify your real income. Some lenders will encourage you to overstate your freelance income, just so they can approve the loan. That's a scam the government takes seriously.
• Investment property status not disclosed. You get a better mortgage rate if you are going to live in the home then if you buy it as an investment. Telling your lender you are going to live there when you are not is a scam.
• Inflating the purchase price. In order to end up with more cash on hand, some people will inflate the price they will actually pay when they talk to the lender in order to get a larger loan than they need. This is a scam and against the law.
• Down payment gift repayment. Some people will borrow money from friends or family members for the down payment with the understanding that they will repay it. Then they will list it as a gift on their mortgage application. This is common scam, but it will land you in jail.
• Phony deposits. If you don't have a deposit, dishonest lenders might tempt you into signing a paper saying you paid the deposit outside of escrow even when no deposit was paid, just to get loan approval and earn a commission. This scam will get you busted down the line.
If anyone tries to entice you into any of these scams, don't fall for it. Instead, write down their name and details and exactly what they said to you and contact your local FBI office. They will be happy to stop these scam artists in their tracks.