The VA Loan Program, which has been offered to US veterans and military men since the 1940s, is probably the most cost-effective loan program there is. Because of its low interest rates and affordable downpayment, it’s no wonder why there is an increasing number of members who take advantage of VA Loans every year. However, VA Loan Program’s success and popularity have its downsides, as more and more companies (even individuals), try to scam VA members of their hard-earned money. What’s even worse, is that these incidents are becoming more and more prevalent each year. If you are planning on applying for a VA Loan or know somebody who might, knowing how to spot a scam’s red-flags would certainly help you in the long run.
How to spot VA Loan scams
When it comes to business dealings, the first rule of thumb is to check: “if something seems too good to be true, it probably is,” and this applies even to VA Loans. It might sound scary, but scams seem to evolve each year. However, the good news is that you can spot most scams because they usually have similar characteristics with each other. If you notice any of the following ‘symptoms’ in a lender, it would greatly help if you simply say no and walk away from an offer as there’s a huge chance that same ‘offer’ could be a scam:
A lender’s interest rates are extremely low compared to other VA Loan providers.
Extremely low-interest rates could be tempting. Best case scenario? You might be able to snatch attractive interest rates. But if not, you might end up getting scammed for your hard-earned money. So, if you’re drawn into a VA Loan offer by a lender because of low-interest rates, try to dig a little deeper as you might want to see what’s beneath the surface. And don’t forget to ask questions. Maybe, you’re just missing out the length of the loan repayment period or the interest rate type, which could be fixed, adjustable or a hybrid of both.
A lender promises too-good-to-be-true guarantees
Is the lender offering you some opportunities to skip mortgage payments?
Is he promising you an escrow money refund?
If anyone the abovementioned scenarios is familiar to your lender, then, you’re most likely looking at a red flag. First of all, VA-approved lenders are not allowed by law to lure clients by promising the latter opportunities to skip mortgage repayments. Second, escrow refunds can only be determined at closing, so there’s no way a lender can guarantee the amount that will be refunded from the escrow money.
The lender asks for money upfront
This is the most obvious red flag because, with VA loans, no amount of money should be collected from the applicant from the very beginning of the application process. The lender can collect closing costs, which can only be done at loan closing.
Unsolicited calls concerning VA loan offers
Several borrowers have already fallen victim to scams made through unwanted phone calls. So, be wary of these especially if the person calling offers too-good-to-be-true promises or if he claims to be a representative of the Department of Veteran Affairs (VA).