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Common Mortgage and Real Estate Scams Target Military

Military families buy quite a few homes: Just one of the by-products of having to move every few years. Unlike civilian families that can spend their lives in one or two homes, a military family can easily buy and sell four to six homes during a military career – and then another home or two in retirement.

It behooves military families, then, to understand common real estate and mortgage fraud scams. Mortgage fraud alone accounts for more than $10 billion in losses every year, according to a recent report by the Federal Bureau of Investigation.

Here are some of the common variants and scams that may affect military families:

Credit-Fixing Scams

Some crooks and scammers will offer to “fix your credit.” For a fee of course. A few of these outfits can provide some valuable services for struggling families trying to boost their credit scores to qualify for a home mortgage. But be careful: These companies cannot erase accurate negative information from your credit reports. If you were legitimately late, or you legitimately owe the money, it’s going to stay on your credit report.

The only thing these outfits can do for you is help you challenge inaccurate entries on your credit report, and help educate you about how to raise your FICO score to qualify for the most advantageous mortgage possible.

Note: It is illegal for Credit-Fixing companies to charge an up-front fee before they provide value to their customer. If they ask you for any kind of an up-front fee, walk away – and report them to the Federal Trade Commission.

Affinity Fraud

Military and veterans tend to trust one another over “outsiders.” Unfortunately, too many people abuse that trust. Some of them are genuinely veterans. Some of them are fakers. But those committing affinity fraud will seek to leverage your common bond to their advantage – and your expense.

Whether your mortgage broker, real estate agent, or the property seller is a veteran or not, it’s important for you to do your own due diligence.

Just as the military has counter-intelligence sections to combat infiltrators and saboteurs, you need to take the basic steps to protect yourself, too. Check out his professional licenses and disciplinary record with your state’s professional licensing board. Check out the company’s record with the Better Business Bureau. Run a search on any recent or pending litigation involving the individual or his or her company.

Not every lawsuit has merit, and even excellent real estate agents, mortgage professionals and other allied professionals get sued from time to time. But at least you’ll know what the issues are and you can be on your guard.

Backwards Application Schemes

Unethical mortgage professionals may try to convince you to falsify your income, assets and record of residences to “help” you qualify for a bigger mortgage. It’s one thing to put your best foot forward. But remember, you may have to raise your right hand and affirm the truth of what you write on the application, someday. If anyone pressures you to lie on an application, they are trying to line their pockets – not yours.

It’s better to have a smaller loan that you CAN afford than a bigger loan that you can’t.

Phantom Fixes

Some unscrupulous operators will buy a run-down house, make some cosmetic fixes, try to conceal known faults, and sell the home at an inflated price. Military families trying to deal with the stress of PCS moves are particularly vulnerable to this scam.

For example, a property flipper may buy a house with bad wiring and severe wet rot in one or more walls, then make purely cosmetic fixes, and slap a coat of paint over the wet-rot, or hang a picture over the wall damage, hoping to conceal it just long enough to get the property sold.

To protect yourself, invest in a home inspection (by someone you select) and an independent appraisal, again by a firm you select.

Also, carefully inspect the mandatory disclosure documents the seller provides to you and your real estate agent. Be very pointed about asking if there is anything material not on the list they need to disclose. Each state has different laws, but the general rule is that sellers must generally disclose all material faults and defects in a property that would materially affect the value of the house.

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