What are the common scams to avoid when applying for down payment assistance?

1 Fake or unauthorized programs

One of the most common scams is when someone offers you a down payment assistance program that is either fake or not authorized by the government or a reputable organization. These scammers may ask you to pay a fee, provide personal or financial information, or sign a contract that has hidden or unfavorable terms. They may also promise you a grant or a loan that never materializes or has very high interest rates or fees. To avoid this scam, you should always research the program and the provider before applying. You can check the website, reviews, credentials, and contact information of the program and verify its legitimacy with the Department of Housing and Urban Development (HUD) or your local housing authority.

2 Phishing or identity theft

Another common scam is when someone tries to obtain your personal or financial information by pretending to be a legitimate down payment assistance provider or a government agency. They may send you an email, a text message, a phone call, or a letter that asks you to click on a link, download an attachment, or provide sensitive details such as your Social Security number, bank account number, or credit card number. They may also claim that you have been pre-approved for a program or that you need to act fast to secure your spot. To avoid this scam, you should never respond to unsolicited or suspicious messages or requests. You should also check the sender's email address, the link's URL, and the letter's logo and signature for any signs of fraud. You should also protect your devices with antivirus software and strong passwords.

3 Foreclosure rescue or loan modification

Another common scam is when someone offers to help you avoid foreclosure or modify your loan terms if you are struggling to make your mortgage payments. They may claim that they can negotiate with your lender, lower your interest rate, or extend your repayment period. They may also ask you to pay them a fee, sign over your deed, or stop paying your lender. To avoid this scam, you should never trust anyone who guarantees a specific outcome, asks for upfront payment, or advises you to stop communicating with your lender. You should also contact your lender directly and seek legitimate counseling from HUD-approved agencies or nonprofit organizations.

4 Home improvement or contractor fraud

Another common scam is when someone offers to perform home improvement or repair services for you after you buy a home with down payment assistance. They may claim that they are affiliated with the program or the government and that they can provide you with a discount, a warranty, or a rebate. They may also ask you to pay them in cash, in advance, or with a large deposit. They may then do a poor job, use substandard materials, or disappear without finishing the work. To avoid this scam, you should always get multiple estimates, references, and contracts from licensed and insured contractors. You should also never pay the full amount until the work is completed and inspected.

5 Title fraud or escrow theft

Another common scam is when someone tries to steal your title or your escrow funds when you are closing on a home with down payment assistance. They may forge your signature, use fake documents, or hack into your email or escrow account. They may then transfer the ownership of the property to themselves or divert the funds to their own account. To avoid this scam, you should always review your title documents, monitor your escrow account, and verify the wiring instructions with your title company or escrow agent. You should also use secure communication channels and avoid opening or clicking on any suspicious emails or attachments.

These are some of the common scams to avoid when applying for down payment assistance. By being informed, cautious, and vigilant, you can protect yourself from these fraudsters and enjoy the benefits of the programs that can help you achieve your homeownership goals.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?