Mortgage Fraud: What to Watch For

Income or employment misrepresentation — inflating stated income, fabricating employment, or using a friendly 'confirmation' letter that doesn't reflect reality — is a common form of mortgage fraud, and one buyers are sometimes pressured into by someone helping arrange financing. It's fraud on your application, and the legal and financial consequences fall on you, not just whoever suggested it.

Title fraud involves someone fraudulently transferring or mortgaging a property without the real owner's knowledge, sometimes targeting properties owned outright with no mortgage (making the fraud harder to notice quickly). Title insurance specifically protects against this.

Down payment fraud — using undisclosed borrowed funds and misrepresenting them as a gift, or an unverified/fabricated source of funds — undermines the lender's actual risk assessment and is treated seriously if discovered, including after closing.

A general rule that covers most of these: if someone involved in your transaction (a broker, realtor, or even a family member) suggests you state something on a mortgage application that isn't strictly true, that's a red flag regardless of how minor it's framed as being.