Mortgage fraud red flags. Loan Scams and How to Identify Potential Red Flags

With the increasing prevalence of mortgage scams, it is essential to stay informed to prevent financial loss resulting from loan scams. If you have been looking for commercial hard money loans, take a close look at the potential lenders.

last updated Sunday, July 13, 2025
#mortgage fraud red flags #Credit History

by John Burson

Loan Scams and How to Identify Potential Red Flags

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You should be aware of the red flags or signs to minimize the risks of a loan scam. Therefore, you should be intense in finding a legit commercial hard money lender. How do you do so?

Lack of interest in your credit history

Loan approvals with no questions asked are fake. If a lender approves your loan without asking about your credit history, that is a loan scam. When you submit a loan application that fake lenders have rejected, they usually instantly provide the loan. They look for an open fee to sell you a bogus insurance policy or even steal your private identity.

Loans offered by phone

It is unlawful for companies to promise you a loan over the phone or request payments before they have verified your information. Fake lenders tend to do this most of the time. When reading the emails they sent, you will see that they also lack Basic English grammar skills. This is a sign that the fake lender is from a foreign country. They are pretending to be real estate investors in the U.S. They can’t make such loans; Therefore, they try to steal your identity and make an upfront fee before making the loan.

Marketing fake insurance

A growing problem in private money lending is the persistence of bogus lenders offering fake insurance policies. The fraudulent lenders pose as commercial hard money lenders and approve the commercial hard money loans with the condition of buying a life insurance policy. The only types of insurance are title insurance and homeowners insurance. They are only paid when the loan is approved and closed. Other than the two, there is no other insurance. Be cautious when pre-paying for any insurance before closing commercial hard money loans.

Always do thorough research on every potential lender that you work with. Please don’t give them personal identity information or pay upfront fees.