As technology continues to change the homebuying process, the dangers and pitfalls of fraudulent activity continue to evolve with it. Thankfully, there are simple steps you can take to protect your assets, so you can focus on this next exciting phase in your homebuying journey.
1. Not comparing mortgage offers
Once you’ve found a home you love, you’ve likely already been preapproved for a mortgage to help you determine how much you can afford. However, you are not obligated to go with the first and only mortgage rate you are given. You can—and should—reach out to at least three mortgage providers to find the best rate.
Given the size of the investment, even the smallest change in interest rate can have a big impact on how much you pay over the lifecycle of your loan. You can also negotiate the terms and look out for any prepayment penalties. Sometimes a lender can charge a prepayment penalty if you decide to refinance your loan before your loan term is up, which could be especially important if you anticipate mortgage rates going down significantly during your loan period.
You should also research any homebuyer programs that may be available to you. There are first-time homebuyer programs available in most states, as long as you meet certain eligibility criteria. The U.S. Department of Housing and Urban Development (HUD) lists a number of loans available nationwide, but you should also research any state-based programs wherever you are located. For example, The Texas Department of Housing and Community Affairs (TDHCA) offers loans to homebuyers who meet certain criteria, such as specific credit scores and income requirements.
We’ve partnered with a number of select lenders who pair industry leading rates with exceptional service. If you haven’t gotten multiple quotes, chose a lender below to speak with a locally licensed loan offer about your specific needs.
2. Ignoring the importance of title insurance
Title Insurance might not be required in your state, but it’s well worth considering. A buyer can buy title insurance at the beginning of the closing process to protect them against financial loss should there be any issues regarding the property’s ownership, or title.
These policies are separate from homeowners insurance and protect your claim of ownership over your newly purchased property. Without title insurance, liens and taxes that you may not know about upon purchase, could become your responsibility. The one-time fee for title insurance is well worth the peace of mind and typically makes up less than 1% of your purchase price.
3. Falling victim to wire fraud
Since 2015, real estate wire fraud has been increasing at an alarming rate. When hackers realized that real estate wire instructions were being shared via email, they took the opportunity to intervene for their own personal gain. By sending their own email and wiring instructions, they stood a chance of having a down payment or closing cost wired to them, instead of the title company.
Now, fraudsters are also making money from seller identity fraud in which they pose as the owner of a property, sell the property, and then disappear with the buyer’s money.
The FBI has reported that Americans lost $12.5 billion to online fraud in 2023, which was up 22% from 2022’s reported numbers.
That’s why the closing or title company manages the closing process to protect all parties in a real estate transaction. They are responsible for ensuring that all the correct paperwork is in place before you take ownership of a home from the sellers. Some title companies have invested in technology, like Closinglock, to further protect their clients and eliminate fraud. In addition to vigilant ID verification, Closinglock offers the Good Funds payment tool, which allows homebuyers to pay for their new investment securely from home—meaning no more trips to the bank, or room for errors—or fraud.
We understand that homebuying can be an overwhelming process, that’s why Closinglock is working behind the scenes to deliver the most efficient—and secure—homebuying experience in the industry.
FAQs
Why should I shop around for a mortgage?
Getting multiple quotes can help you secure a lower interest rate and better loan terms.
Should I use the lender my agent recommends?
There’s likely nothing wrong with the lender they recommend, but it’s highly unlikely they offer the lowest cost option for you. It costs you nothing to compare other quotes and could save you tens of thousands of dollars over the life of your loan.
Is title insurance really necessary?
Yes, it protects you from ownership disputes or unexpected claims on the property, which could lead to significant financial loss without coverage.
How can I prevent wire fraud when buying a home?
Verify all wire instructions with your title company over a known phone number and use secure payment tools like the Good Funds tool by Closinglock, saving you thousands over the life of your loan.
