Purchasing a new home is a major endeavor that can take months to complete while involving several important steps. There’s money to be paid, forms to fill out and sensitive information to share. Unfortunately, scammers know this well, so they’re out to hijack the most crucial part of the process: the closing. Closing on a home is an exciting and often stressful time. You’re finally nearing the end of the long journey to home ownership and the house will soon be yours! 

There’s so much to do, and emotions are running high. One slip-up to a scammer can destroy it all. Here’s what to know about mortgage closing scams and how to avoid falling victim.

How the scams play out

In a mortgage closing scam, scammers send spoofed emails or letters to homebuyers that appear to represent a real estate agent, legal representative or another trusted individual. The homebuyer is directed to wire their closing funds to a specific address, which they may be inclined to do because the note arrives just days before the actual scheduled closing. Of course, if the homebuyer complies, they’ll be wiring money directly to the scammer, and not paying their closing costs. 

In a variation of this scam, a homebuyer is contacted by an alleged mortgage lender with a new loan offer that undercuts the one they are in the process of completing. The loan will offer lower rates and an earlier closing date. The only catch is an upfront fee. The lender may also require the homebuyer to share sensitive information early on in the application process. Unfortunately, the “lender” is a scammer who will simply pocket the money and likely use the shared information to empty the victim’s accounts or commit identity theft. 

Protect yourself

Here’s how to avoid falling victim to a mortgage closing scam:

• Designate two trusted individuals in the mortgage closing process to serve as your professional contacts throughout this time. These individuals can be any member of your real estate agent or mortgage lending teams. Discuss all details of the closing process with these individuals, including the transfer of funds and the exact protocol for payments. Explain that you will only make changes to the agreed-upon protocol if you hear it directly from one of these individuals. Choose a specific phone number for each of you to use for contacting the other about the mortgage process.
• Before wiring any funds as part of the closing process, confirm instructions with your designated trusted individuals. Verify the account name and number for the transfer of funds in person or by using the phone number you’ve previously agreed to use.
• Never follow changes in instructions sent by email without confirming these changes with your trusted contacts. 
• Avoid using phone numbers or clicking on links contained in emails from unknown sources or even unexpected emails from what seems like a legitimate source. 
• Never agree to pay upfront fees for a loan.
• Be wary of unsolicited loan offers. Research every potential lender by looking for proper documentation and a positive BBB rating.
• Never email sensitive financial information. It’s best to share this documentation in person. 
• Never share personal information over the phone if the contact is unverified. 

Red flags

Look out for these red flags that can indicate a mortgage closing scam:

• A sudden, unexplained change in the protocol for the transfer of funds during the closing process.
• Aggressive advertising for a loan promising very low rates and almost guaranteed eligibility.
• A lender demanding up-front fees before the loan application process can ensue. 
• A lender asks you to share sensitive information early on in the application process and through unsafe mediums.

If you’re targeted

If you believe you’ve been targeted for a mortgage closing scam, immediately contact your credit union or the wire-transfer company you used to move the funds. Explain the situation and ask for a wire recall. Reporting the error as quickly as possible makes it more likely for you to reclaim the funds. 

Next, file a claim with the FBI and the FTC. Share the details of the scam so law enforcement agencies can try to apprehend the crooks behind it.

Finally, if you’ve been targeted but you haven’t yet shared any funds or information with the scammers, disengage. Block all calls and emails from the scammers and be wary of any communications appearing to be from your authentic mortgage lender. 

Closing on a home is the end of a long and exciting process, but scammers want to ruin it for you. Follow the tips outlined here to avoid falling victim to mortgage closing scams. Stay alert and stay safe!