Mortgage fraud tips: Types of fraud you can avoid

Be careful when you are applying for mortgage. You do not want to give in any false information so that your application may be turned down due to false information or misrepresentation of facts. Rejection would be a trifle matter compared to other consequences you might have to face like paying a six figure fine or seeing the FBI on your doorstep.

So that you don't get involved in mortgage fraud by choice or unconsciously, take a look at what constitutes mortgage fraud:

• Unspoken second mortgage: If you don't have to make a down payment yet you borrow the down payment amount from the seller in return for a silent second mortgage that is not mentioned on the record and that which is concealed from the lender.


• Forge income: Inflating your income to get approval for a mortgage is considered as fraud.


• Non-owner occupant yet declaring habitation: Lenders charge a high rate of interest from those borrowers who want to buy a house but have no long term plans to stay in that house. So, if you inform your lender that you will be staying (to get a lower rate of interest) and in reality do not stay, you will be committing a fraud.


• Blown up price: When you have 2 purchase price and send the higher price to your lender with a view to get higher appraisal, you will be committing fraud.

If you are a first time home buyer and are thinking "how much house can I afford?" remember that this depends on the amount you can borrow and the amount you can gather for down payment. The annual mortgage payment that you make taxes and also homeowners insurance must not go beyond 28% of your gross income.

What are the main factors when locking a mortgage loan?

You may keep 3 important factors in mind when locking a loan:

• Interest rate


• Duration of the period


• Points

If you extend your loan lock period you will be charged a high rate of interest because your lender is assuming the risk of rates going up while you take your time to decide about a particular loan. So, real estate experts advise that you should not keep your lenders waiting. Lock the loan instead as soon as you can to avoid high interest rates.78

Samantha Taylor is a contributing Financial Writer, Moderator and Community Mentor of MortgageFit. She has been an active participant in the forums wherein she offers mortgage advice and many other suggestions to people in loan problems. If you have a query on "how much house can I afford" related issues, you can simply discuss it with her in the Mortgage Forum.