How To Avoid Loan Fraud? By Subhash Kumar At Isnare.com Ezine Articles

Fraud is a crime of deliberately deceiving another to obtain property or services from him. Loan fraud occurs when you (or a real estate agent, appraiser, mortgage broker, attorney, closing agent, others) make false statements in order to qualify you for a loan that's larger than you would be entitled to under the lender's guidelines.

Loan Fraud can occur in following ways:

• Any false statement made to a lender is loan fraud.

• Rebates and credits to any individual as a result of a real estate transaction must be disclosed on the settlement statement.

• An inflated appraised value for the property that is collateral for the loan.

• False information about the borrower's creditworthiness.

• False statements about who will live in the property.

• Undisclosed rebates to any third party.

Guidelines to avoid Loan Fraud

• Do not make any decision in hurry. Compare the prices of real estate or property before buying or purchasing.

• Do your homework before beginning the loan process so that you don’t fall prey to unscrupulous lenders.

• Be careful about disclosing things like your need of cash due to medical, unemployment or debt problems. You are very vulnerable in these cases.

• Do not let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.

• Double-check that the interest rates and loan amounts all add up at closing. Sometimes a lender will try to sneak a different rate in, hoping you won't notice. Make sure that everything is correct.

• Do not sign any false statement about which you do not know.

• Donors and recipients commit loan fraud when they falsify a gift letter so take care for that.

• If you don't need to refinance, don't do it. It only strips your home of equity and costs you a lot of money in closing costs.

• The key to avoiding fraud is in being educated, asking a lot of questions and understanding that the lender is not your friend. Be friendly, but be cautious.

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