First Time Home Buyer Scams

Watch Out for These First-time Homebuyer Scams

Buying your first home is an exciting adventure. However, criminals can take all the joy out of that experience by tricking first-time homebuyers out of their money, information, and sense of security. Let’s take a look at today’s first-time homebuyer scams and how you can avoid them.

Fake Down Payment Assistance or Forgiveness
Criminals capitalize on uncertainty by advertising guaranteed down payment assistance. Typically, you have to pay a fee to be considered and start the paperwork. However, once you pay the fee, you’ll get nothing in return. To protect yourself from this scam, only work with reputable assistance providers. You can find a list of legitimate programs for Montanans from the Department of Housing and Urban Development (HUD).

Application Fee Scams
Criminals promising 100% approvals or more lenient borrowing options will charge a hefty up-front fee but never deliver your mortgage loan. To avoid this scam:

1. Do your homework.
2. Be wary of lenders asking for unusually high application or credit processing fees.
3. If you’re unsure about a lender or their fees, contact the Clearwater mortgage team. We’ll help you determine whether the offer is legitimate or not.

Fake Real Estate Agent
A good real estate agent can help you find the perfect home. A fake one will trick you out of your money through fees for non-existent services. Then, they’ll disappear leaving you with less cash and no home. Remember, when you’re the buyer, you don’t need to pay your agent anything, they will collect their fee from the sellers once they’ve found you a home, negotiated the price, and the closing is complete.

Earnest Money Scams
When you’re serious about buying a home, you often put down a good faith deposit, usually called Earnest Money. This deposit enters the you and the seller into a purchase agreement. The seller then takes the home off the market and it’s listed as sale pending. When the deal is legitimate, that earnest money is applied to your down payment or closing costs. When criminals are involved, those funds, which are often far higher than they should be, are taken by the seller when they claim fake issues and terminate the deal. Working with your real estate agent, only put down the customary 1-3% for the good faith deposit and carefully review the terms. If you feel unsure about it, terminate the deal and look for another home.

Inadequate Inspections
Fraudulent home inspectors hired by the seller’s agent can ignore problems that could lower the home’s value. If the issues are severe enough, you could end up spending thousands to fix the issue(s) after you’ve taken possession of the home. Avoid this scam by working with reputable home inspectors you or your real estate agent know and trust. You can also check out a list of certified Montana inspectors at the International Association of Certified Home Inspectors website.

Report Fraud to the Feds:

If you spot or become a victim of these or other homebuyer scams, report it to the Federal Trade Commission (FTC) and contact the Clearwater mortgage team. We’ll do what we can to help, including reviewing mortgage loan offers and helping you avoid issues.

All loans are subject to approval. Equal Housing Lender. NMLS#447584. Insured by NCUA.