How to Avoid VA Refinance Scams
VA refinance loans allow eligible Veterans and active-duty military personnel to refinance their existing mortgage with flexible requirements. However, VA refinances are not immune to scams and deceptive practices that specifically target eligible borrowers.
These scams can be difficult to detect, and victims can suffer significant financial losses and damage to their credit scores. It's crucial for Veterans to be aware of the red flags and take steps to protect themselves from these predatory practices.
It’s important to recognize the signs indicating you may be involved in a VA refinance scam. While every situation is different, here are some of the most common warning signs:
VA Cash-Out refinance loans enable eligible borrowers to tap into 100 percent of their home equity at a low-interest rate. However, these loans are usually targeted by scammers aiming to take advantage of a homeowner's equity.
When refinancing, it's important to remember that you're essentially resetting the clock on your mortgage, and this process comes with closing costs. These costs typically range from 2-5% of the loan amount, with the VA funding fee being the only closing cost that can be financed.
Scammers may attempt to persuade borrowers to refinance with a VA Cash-Out loan, only to manipulate them into repeatedly resetting the loan length. This tactic allows the scammers to continuously apply fees from closing costs, profiting at the borrower's expense.
VA Streamline refinance loans, also known as Interest Rate Reduction Refinance Loans (IRRRL), are designed to make the refinancing process simpler and more affordable for eligible borrowers. These loans come with flexible documentation requirements and do not require a new home appraisal, which can save time and money for borrowers.
However, the ease and affordability of VA Streamline refinance loans also make them vulnerable to scams. Scammers may pose as offering the opportunity to turn loans into a profit for the borrower while their true intention is to defraud the homeowner.
Because VA Streamline refinance loans are easier to approve and often close faster than traditional refinances, it's essential to choose your lender with care. Make sure you compare IRRRL offers from various lenders and use caution when trying to determine the best interest rate.
By remaining vigilant and informed, you can protect yourself and your finances while benefiting from the advantages of VA home loans. Here are some tips to ensure a secure refinancing experience.
It is essential to be wary of unsolicited offers or third-party contact regarding refinancing or "help" with your mortgage that you did not initiate yourself. While it is normal for your lender to periodically send you information on refinancing terms or other details, you should take caution with unrelated parties reaching out to you.
Never give out personal information to a lender or servicer who randomly contacts you. Scammers can manipulate caller identification to pose as a VA lender. If you’re unsure, it’s always safer to hang up and call your lender directly at the number on your mortgage statement.
When in doubt, it’s best to contact your lender about any suspicious activity to get clarification and potential help. Part of your lender’s job is to help you, so direct any questions to them or the VA.
If you think a VA refinance loan may be the right choice for you, check out today’s rates to see how much you can save on your mortgage. An important reminder that VA refinancing rates can vary from lender to lender.
