Know the red flags to see common mortgage refinancing scams. (iStock)
With the refinancing rates associated with historical lows, this may be a good time to buy your home loan better. According to the mortgage association, on February 26, 67.5% of the total weekly home loan applications accounted for.
But there is one thing to note – mortgage refinancing scam.
Fraud related to mortgage refinancing has become particularly problematic as a result of COVID-19. People struggling to pay off mortgages can be an easy target for homeowners. Knowing how to avoid scams can help protect your financial and personal information.
If you are thinking of refinancing, consider using it credibly. You can use Credible’s free online tool to easily compare multiple money lenders and see the pre-qualified rates within three minutes.
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5 Ways to Detect Scam Refinancing Fraud
Some refinancing loans are subtle, while others are more obvious. Knowing the most common red flags to take note of can help you compare mortgage refinancing options. Here are some simple ways to eradicate a refinancing scam:
- Determine if a mortgage lender is legal
- Beware of excessive fees
- Resist high pressure tactics
- Get it in writing
- Trust your instincts
1. Determine if a mortgage lender is legal
Before offering financial or personal information for refinancing mortgage loans, you must first know who you are dealing with. One of the most common mortgage lenders is phishing, in which you are contacted by email, email, phone or even text message by a seemingly legitimate mortgage lender. If you receive an unsolicited invitation to refinance mortgage loan, you need to do your homework to determine if the offer is legal. You can also contact Credible’s experienced loan officers to answer your mortgage questions.
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2. Be wary of unusual or excessive fees
There are certain costs involved in refinancing mortgage loans, but a sure sign of a possible scam is being asked to pay a fee in advance before a lender has done anything to you. Refinancing fraud can also be characterized by extraordinarily high fees or seemingly hidden fees that are built into the loan without explanation.
3. Resist high pressure tactics
With the refinancing rates as low as they are, it is tempting to agree to loan terms at the suggestion of a money lender. But fraudsters posing as borrowers can use high-pressure tactics to get you to agree to a refinance loan without understanding what you are committing yourself to. Rather, take the time to compare the mortgage rate using an online tool like Credible to see what you may be eligible for in advance.
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4. Get it in writing
No matter how low the mortgage refinancing rates go, do not take out a loan without reading the documents carefully. Ask to see a “revelation of the truth” if one has not yet been provided to you and search it by looking for unexplained or hidden charges. Remember, however, that you can still be targeted by a bait and link fraud, in which a refinance lender replaces or changes loan documents after you sign them.
5. Trust your instincts
Here’s a simple rule of thumb for refinancing scams: if something seems too good to be true, it probably is. A lender that promises you low refinancing rates that you would not normally qualify for, for example based on your credit score, could sell you a piece of goods to defraud you. Similarly, a money lender who immediately asks for your social security number, bank account number or other sensitive personal information may target you for a scam.
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Is it wise to refinance your mortgage now?
If you want to save on mortgage costs, the low rates are an inviting prospect. If you are considering whether you should try to take advantage of the low refinancing rates that are almost record high, there are a few things to consider first.
For example, how likely are you to qualify for a refinance loan and get the most favorable mortgage rates? The coronavirus pandemic has led many lenders to impose strict restrictions on mortgage lenders. This includes taking a closer look at a homeowner’s credit score, credit history, credit utilization rate and debt-to-income ratio.
Also consider whether a mortgage is refinanced from a financial perspective. Even with record low refinancing rates, your refinancing savings can be minimal if you do not plan to stay in the home for the long term, or if you have already paid off a significant portion of the principal on your original home loan.
Using an online calculator, you can estimate the monthly cost of a new loan. Buying for a refinance loan also matters. If you are thinking of refinancing, consider using it credibly. You can use Credible’s free online tool to easily compare multiple money lenders and see the pre-qualified rates within three minutes.
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