When you are looking for a mortgage, you give out a lot of personal information.
You offer up your Social Security number, address, income statements, tax returns, and whatever other documentation a lender requests.
Since providing that information can make you more susceptible to identity theft, here are some simple things you can do to minimize your vulnerability.
Always Work With a Trusted Agent and Broker
Banks carefully vet their employees to ensure they are trustworthy. When shopping for a loan, you should do the same.
Start with your real estate agent.
Make sure you use someone who is fully certified and has a good reputation. Don't be afraid to ask for references and then call them.
If you have a real estate agent you can trust, ask them for a referral for mortgage lending.
A bank or credit union is your best bet for obtaining a loan without worrying about personal information getting public. These institutions have strict policies in place to protect your financial data, but only if you are getting a loan directly from the bank.
Watch Out for Third-Party Lenders
Sometimes when you are working with a mortgage lender, they shop out the loan.
If a bank won't finance you, there are alternatives.
Private investors or small lending companies might offer the money. To do that, your lender needs to take your financial information to these third parties.
Before you agree to that kind of exposure, ask about the potential lenders.
They want to vet you for financial soundness, but you should also vet them. After all, one in seven Americans was a victim of identity theft in 2014, and that number goes up every year.
In addition, as many as 70 percent of mortgage companies use information sharing practices that could put you at risk.
Always know who will be looking at your financial information to keep a lid on potential breaches.
Avoid Internet-Only Lenders
If you are shopping for a loan online, avoid any lender that doesn't offer a telephone number. Always give the company a call before filling out any forms.
You'll want to look up their record and check for scam reports.
After all, internet-only companies typically just act as a clearing house, putting you in touch with a local mortgage broker. If that's the case, you can probably find one without worrying about exposing your information online.
Check for Licensing
Most states require mortgage brokers to carry a current license.
The type of license they have may impact their choice for lender. For example, in California there are two types of licenses, each issued by different government agencies.
One license only allows the broker to shop with finance companies and private lenders, not banks and credit unions.
To get the most variety, be sure to work with a mortgage broker that can shop your loan to all types of lenders. Also check to make sure their licensing is up-to-date and valid before you sign any agreements.
Mortgage Broker Fraud Warning Signs
If you are financing a property purchase, you'll likely need to work with a mortgage broker, but not every broker is honest.
Identity theft is one issue, but fraud can also play a role when you work with an unethical broker.
If you see any of the following warning signs, walk away and put credit monitoring in place.
- You can't use your own lawyer. If a broker ever denies you your choice of representation, that is an immediate red flag. You have the right to have legal representation that has your best interests at the top of the list.
- Make deposit checks payable to the brokerage. Your broker should never be issued a direct check. Their fees are paid by the lender, not the purchaser. Any deposit, earnest money or down payment should never go to the broker, only the lender or an attorney representing the lender.
- Broker encourages misinformation on the application. It might be easier for them to shop the loan if you put down a higher income level, but a falsification can come back to haunt you at closing.
- Property value seems unusually high. If other properties in the neighborhood are going for substantially less, you might want to run a title search to ensure your broker and agent have no financial interest in the property.
- Offer price and mortgage amount don't match. If you put in an offer on the property, the mortgage might be a little higher to cover closing costs like taxes, title fees, insurance and other expenses, but a dramatic difference could mean something is wrong.
Minimize Risk With Secure Practices
There is always some risk associated with obtaining a mortgage. The trick is to be cautious and careful during the process to prevent the problem.
Check your credit report regularly to catch unauthorized activity.
If you stop receiving your bills, contact the issuing company.
These are just a few signs that something might be wrong. It might also be a good idea to get credit monitoring before, during and after obtaining a mortgage.
A few months of monitoring might save you years of getting everything straightened out after identity theft.
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