Banks and other home financers have cracked down on mortgage applications recently, particularly in the case of first-time home buyers. Thus it’s even harder to apply for essential financing to buy a home, and because very few buyers can afford to pay for their first homes in cash, they may be susceptible to mortgage fraud.
One of the biggest and most attractive scams is to falsify loan applications, perhaps under the advice of dishonest mortgage brokers and other real estate professionals. The law is unequivocal in this regard and any misstatement or even omission can amount to fraud, entitling the underwriter – on discovery of the fraud – to claim the loan back in full.
There is other wheeling and dealing that’s best avoided because it amounts to mortgage fraud. For example, if the seller offers to pay for renovations under the table – or in other words, without disclosing the deal in the purchase contract and without letting the lender know – then this is a breach of the mortgage. If a down payment is offered to new home buyers as a gift, for example, in the guise of a wedding present, neither giver nor recipient should expect that the money be repaid.
This flouts the basic definition of a gift and amounts to loan fraud. On the subject of down payments, it’s not advisable to offer the seller a “silent second” mortgage or money from a down payment from a second mortgage without fully disclosing the first mortgage. In this instance, the first mortgage lender and seller will both be left in the dark regarding the true state of finances prior to the sale.
Before entering long-term financial contracts, you’re entitled to know who you’re dealing with. Carry out a company check on your mortgage lender to gauge the health of the business in terms of its annual accounts, turnovers and performance ratios. Use this information to select your partners wisely when seeking finance for your new home.