What homebuyer scams look like and how they work

Homebuyer information scams target people who are trying to buy a home or refinance a mortgage. The scammer poses as a lender, government program, or housing counselor and promises to lower your interest rate, reduce your down payment, or get you into a home you cannot otherwise afford. They ask for upfront fees — sometimes hundreds or thousands of dollars — before any work is done. Once you pay, the scammer disappears or delivers nothing.

The most common version is the advance-fee scam. You see an ad online or in a newspaper promising a loan modification, down payment help, or a special government program. You call the number. The person on the phone sounds professional, uses official-sounding language, and may even send you documents that look like they came from a real lender or agency. They tell you to wire money or send a check to "find" your loan or "process" your process. Legitimate lenders and government programs never ask for money before you receive the actual service.

Another common scam is the bait-and-switch. A lender advertises a low interest rate or favorable terms to get you interested. Once you are deep in the process, they change the terms, raise the rate, or add hidden fees. By then you have already paid inspection fees, appraisal fees, or credit report fees that the scammer keeps regardless of whether the loan closes.

Key Takeaways

  • Legitimate lenders and government programs never ask for money upfront before you receive a loan, down payment help, or other information.
  • Real housing counselors are free and are certified by HUD; you can find one through the Housing Counseling Hotline at 1-800-569-4287 or at HUD.gov.
  • Verify any lender or program by checking the Nationwide Mortgage Licensing System (NMLS) at nmlsconsumeraccess.org or by calling your state banking regulator.
  • Scammers often create fake websites, email addresses, and phone numbers that look almost identical to real government agencies or lenders.
  • If you have already paid a scammer, report it to your state attorney general, the Federal Trade Commission, and your local police department.

Red flags that signal a scam

Upfront fees are the single strongest warning sign. If someone asks you to pay money before you have a signed loan agreement or before you have actually received down payment help, it is a scam. This includes process fees, processing fees, "good faith" deposits, or fees to "unlock" a special program. Real lenders collect fees at closing, not before. Real down payment information programs do not charge the homebuyer anything.

Watch for pressure to act fast or secrecy about the deal. Scammers say things like "this offer expires today," "you have to wire the money right now," or "do not tell your real lender about this." Legitimate lenders give you time to review documents and encourage you to ask questions and seek information. They are transparent about all terms and fees.

Be suspicious of anyone who guarantees you a loan or promises to remove negative items from your credit report. No one can may provide a loan before a full underwriting process. No one can legally remove accurate negative information from your credit report. If someone promises either of these things, they are lying.

Fake documents and impersonation are common. Scammers copy the logos, letterhead, and language of real agencies like HUD, Fannie Mae, or your state housing finance agency. They create email addresses that look almost like the real thing — for example, "hud-information@gmail.com" instead of an actual HUD email. They may send you official-looking forms or loan documents. Always verify directly with the real agency or lender by calling the phone number on their official website, not a number the scammer gave you.

How to verify a lender or program is real

Before you give anyone money or personal information, verify they are who they say they are. Start by checking the Nationwide Mortgage Licensing System (NMLS) at nmlsconsumeraccess.org. Every licensed mortgage lender, broker, and loan officer in the United States must be registered there. Search by company name or by the person's name. If they do not appear in NMLS, they are not licensed to lend in your state.

Call your state banking regulator or state attorney general's office directly. Use the phone number from your state government's official website, not from any document the lender sent you. Ask whether the company is licensed and whether there are any complaints against them. Most states maintain a searchable database of licensed lenders and complaint histories.

For government programs, go directly to the official website. Do not click links in emails or ads. Type the URL yourself into your browser. For example, if someone claims to represent a federal down payment information program, go to hud.gov and search for down payment help programs in your state. If someone claims to represent your state housing finance agency, search "[your state] housing finance agency" and go to the official .gov website.

Ask for references and verify them independently. A real lender or counselor will give you names of past clients you can contact. Call those people yourself using phone numbers you find independently, not numbers the lender provides. Ask whether they actually received the service promised and whether they were charged upfront fees.

Working with a real housing counselor instead

If you are looking for help with down payment information, loan modification, or understanding your mortgage options, work with a HUD-certified housing counselor instead of a private company. HUD counselors are free, they are not trying to sell you a loan, and they have no financial incentive to steer you toward a particular lender.

Find a counselor by calling the Housing Counseling Hotline at 1-800-569-4287 or by visiting HUD.gov and searching for counseling agencies in your area. You can also call 211 and ask for housing counseling. Real HUD counselors will never ask you for money. They will review your financial situation, explain your options, and help you understand what programs you may be able to use.

HUD counselors can also help you understand the difference between legitimate down payment information programs and scams. Many states and cities run real down payment information programs that do not charge the homebuyer. A counselor can tell you which ones exist in your area and what the actual requirements are.

What to do if you have already paid a scammer

If you have sent money to someone claiming to offer homebuyer information, stop all contact with them when ready. Do not send additional money, even if they say they need more to "complete" the process.

Report the scam to three places. First, file a complaint with the Federal Trade Commission (FTC) at reportfraud.ftc.gov. The FTC tracks scams and uses the information to warn the public and pursue scammers. Second, report it to your state attorney general's office. Third, file a police report with your local police department or sheriff's office, even if you think they cannot recover the money. A police report creates an official record that can help if the scammer targets others.

If you paid by credit card or debit card, contact your card issuer when ready and dispute the charge. If you wired money, contact the wire transfer company (Western Union, MoneyGram, or your bank) right away. The money may still be retrievable if you act within hours. If you sent a check, contact your bank and ask whether you can stop payment.

Keep all documents related to the scam — emails, text messages, letters, receipts, bank statements, and the scammer's contact information. Give copies to the FTC, your state attorney general, and the police. Do not destroy anything.

Common scam variations targeting specific groups

Scammers often target people with lower credit scores or recent financial problems, because those people are more likely to be desperate for help. If you have been denied for a mortgage, received a foreclosure notice, or have bad credit, you are at higher risk. Scammers also target immigrants and non-English speakers, using language barriers to their advantage and sometimes impersonating government agencies to create fear.

Another variation targets people who are behind on their mortgage payments. Scammers claim to offer loan modification or foreclosure prevention. They ask for money upfront and promise to negotiate with your lender. Real loan modification programs do not charge upfront fees. If your lender offers to modify your loan, they will do it directly with you at no cost to you.

Some scams target people who own their home outright or have significant equity. The scammer offers a "cash-out" refinance or a home equity loan at a very low rate. They collect fees and disappear, or they close a loan with terms much worse than promised. Always get loan offers in writing, review them carefully, and have a real estate attorney review any mortgage documents before you sign.

Frequently Asked Questions

Can I get my money back if I already sent it to a scammer?

It depends on how you paid. If you used a credit card or debit card, your card issuer may reverse the charge if you report it quickly. If you wired money, the wire company may be able to recall it within hours. If you sent a check, your bank may be able to stop payment. Report the scam to the FTC, your state attorney general, and police when ready. Recovery is not may provide, but reporting creates an official record that helps authorities pursue the scammer.

Is it ever okay to pay a fee upfront for a mortgage or down payment help?

No. Legitimate lenders collect fees at closing, after you have a signed loan agreement and after the lender has committed to lending you money. Down payment information programs do not charge the homebuyer. If anyone asks for money before you have a signed loan agreement or before you have received the actual information, it is a scam.

How do I know if a down payment information program is real?

Real programs are run by government agencies, nonprofits, or lenders and are listed on official websites. Ask a HUD-certified housing counselor which programs exist in your state. Call your state housing finance agency directly using a phone number from their official website. Never rely on a phone number or website that someone else gave you.

What should I do if I see an ad for homebuyer information that seems suspicious?

Report it to the FTC at reportfraud.ftc.gov. If it is a website, include the URL. If it is a phone number, include that. If it is a social media ad, take a screenshot. The FTC uses these reports to identify patterns and shut down scam operations.

Can a housing counselor help me understand if an offer is a scam?

Yes. Call a HUD-certified housing counselor at 1-800-569-4287 or through 211. Describe the offer and the person making it. A counselor can tell you whether it sounds legitimate and can explain what real programs actually cost and how they work. This service is free.