It can be easy to get caught up in the details — the beautiful new kitchen; the walk-in closet; the heated garage — when you’re house-hunting. But don’t forget to do your homework to make sure your home-buying process doesn’t include any surprises.
How can you get ripped off when buying your first home?
According to the U.S. Department of Housing and Urban Development (HUD), tactics scam artists use include:
● Using false appraisals to sell properties for more than they’re worth
● Encouraging borrowers to lie about their income, expenses, or cash available for down
● Pressuring borrowers to accept higher-risk loans such as balloon loans, interest-only payments
● Lending more money than a borrower can afford to repay
● Charging high interest rates to borrowers based on their race or national origin and not on their credit history
● Charging fees for unnecessary or nonexistent products and services and high prepayment penalties
● Presenting different costs or terms at closing than the ones initially presented to borrowers
● Leaving items blank in legal documents
To help give yourself more peace of mind when buying a home, be sure to work with a trusted financial institution. A reputable bank will ensure you are receiving a legitimate mortgage and rate.
How can you prevent mortgage ripoffs?
HUD also has common-sense recommendations to prevent mortgage fraud.
- Select a real estate agent you can trust. If you don’t know someone local, ask a friend.
- Attend a homeownership education course offered by a HUD-approved, nonprofit counseling agency.
- Don’t let anyone convince you to borrow more money than you can repay. If you get behind on your payments, you may lose your house and all the money you put into your property.
- Never sign a blank document or a document containing blanks. Write “N/A” or cross through any blanks. If you don’t, you may still be legally bound by terms written in after you signed.
- Don’t pay too much for your home. Ask your realtor for a home comparison or go to the county auditor’s property search site.
- Use a home inspector. If repairs must be made before the sale, document whether you or the seller must make the repairs.
- Ask questions if you don’t understand something. You can ask your Realtor or your local banker. Don’t sign anything you don’t understand.
- Don’t let anyone persuade you to make a false statement on your loan application, such as overstating your income, understating your debts, or lying about the source of your down payment. Lying on a mortgage application is illegal.
What other actions should you take before taking out a mortgage loan?
Avoiding unscrupulous mortgage brokers is only part of the process of buying a home.
Your home is probably the biggest purchase — and perhaps the longest commitment — you will ever make. You need to fully understand the terms and conditions of the loan, as well as the out-of-pocket expenses for closing and transferring the property title into your name.
There will also be new expenses for living in your dream home. As an investment, your home needs to be maintained to hold or add to its value when it comes time to sell in the future. Other common day-to-day expenses include utility bills and homeowners insurance to cover replacement costs.
Finally, you can get help from opportunities like the Welcome Home Program , which provides financing and home-buying education for first-time homebuyers each spring.
Prepare to buy your first home with our mortgage guide
Get help with understanding the ins and outs of home loan mortgages with our handy guide. You’ll learn about:
- Different types of mortgages
- Which type is best for you
- How to apply for a mortgage
This is a guide you’ll want to bookmark. Check it out here!
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