There are a few scams used by unethical lenders that one should watch out for.  These abusive lenders may target the elderly, minorities, low-income or bad credit individuals who own a home.  This home is the only asset these people have and the lender is basically out to get it. 
The first scam is called equity stripping and it applies to these people.  They find people who need money but have a low monthly income.  Knowing that they cannot make the monthly payments, they tell them to “pad” their income on the loan application.  They then put them in a loan that the people will not be able to pay back.  Suddenly, these people are behind on payments and will eventually lose their house.  These people are just trying to make a living and then abusive lenders come by and basically steal from people who are already barely making a living. 
The second scam is loan flipping.  This can happen to anybody.  You are contacted by a lender who tells you to either consolidate your debt or make your home’s equity “work” for you.  You may have had your mortgage for years.  The will tell you about a loan with a low interest rate and then refinance your home’s mortgage or an equity loan.  You are able to make your monthly payments and you get some extra money.  Then they call you back and offer you a loan that they can refinance with your current loan.  What they don’t tell you is that there is fees and penalties for refinancing the first loan again.  Eventually, you end up with a string of debt that has grown over the years and you can’t get out. 
Both of these scams are commonly used.  You should first be aware that the lender’s who call you on your home phone during the day do not really know anything about you.  They tell you to come and consolidate your debt or get a home equity loan.  What they are really doing is trying to bait you into a loan that will only hurt your credit.  Financial responsibility and common sense must be used in these situations.  If you are already in financial problems another loan is only going to sink you more.  Be smart and tell the phone lenders to take you off their call list and only take loans out on large purchases that you know you can pay back. That is the best way to avoid such situations.

Are there ways to save your money when buying a new home?  Sure there are!  Financial planners will give you an abundance of advice using big terms on how to save your money.  I’d rather have the dish in plain language.  Pick and choose the ones that seem right for you.  Don’t feel you have to use them all, although if you can, great!

 
* Recycle the proceeds of your previous house sale into a down payment.  This will lower the amount of money you need to borrow.
* Ask about seller financing.  Somewhat risky, but if a sound contract is written, both parties benefit.
* Put down 20% of the sale price.  You’ll save yourself the mortgage insurance.  If you don’t have it upfront, make sure you notify your lender when you’ve paid in the 20% and that they’ve stopped charging you for it.
* Try to assume the existing house loan.  You’ll have a lower note than if you bought the house at market value.
* Pay points to lower your interest rate.  Sure it’s a chunk of change at the outset, but those lowered rates will save you thousands across the life of the loan.
* Play the “Who Wants to Hold My Loan?” game.  Lenders want your business.  Get them to compete a little for it.
* Good with your hands?  Buy a fixer-upper.  Nothing like a little sweat equity to make you smile.
* What’s one of the best deals around?  Foreclosures.  Banks are desperate to offload houses they’ve had to foreclose on.  These bargain beauties may need a little TLC, or not, but you’re guaranteed to get it for a deep discount price.

It is really worth setting up a budget that allows you to pay ahead on your mortgage.  If you can pay an extra $100 a month, you can save yourself tens of thousands of dollars on your total interest paid on your mortgage.  Even paying as little as $25 extra month can save you thousands of dollars.

This only works, however, if you don’t have a prepayment penalty in the terms of your mortgage.  You also get to use the interest paid on your mortgage as a tax deduction and reducing the amount of interest paid will reduce the amount of taxable interest.  Furthermore, you might have other places that would be better served with the money you could use to pay ahead on your mortgage (i.e. high interest credit cards or lucrative investment opportunities).

If you do decide to pay ahead on your mortgage, there are a few ways to do this.  You can make a double payment one month each year or add on money to your principle payment each month.  You might also want to look into a bi-weekly plan that will have you make two payments per month instead of one, but over the course of a year you’ll have made one extra monthly payment that will cut down on your mortgage over the years.

A reverse mortgage is a loan against your home equity that requires no repayment for as long as you live in your house.  The loan will be paid off when you cease to live in your home.  There are no monthly payments and you can choose to get the money in one lump sum or in monthly payments.  The money is also tax-free. 

 
A reverse mortgage requires no monthly payments and therefore you do not have to worry about not making payments or losing your home.  You can qualify for a reverse mortgage if you are 62 years of age or older.  The loan amount is determined by how much equity your home has built as well as what the current interest rates are, etc.  Your personal credit has nothing to do with whether or not you will qualify.  If you are still paying on your existing mortgage, the amount that is left will be used to pay off your mortgage. 

 
For example, say if you have you owe $100,000 on your existing mortgage and your house qualifies for $125,000 reverse mortgage and you plan on living in the house for at least another 5 years.  Your current mortgage would be paid off and you would have $25,000 to do whatever you want with.  You could put a down payment on a vacation home, take the vacation of your dreams or give the money to your grandchildren for college.  It is completely up to you what you choose to do with the money.  The loan is repaid when you cease to occupy your home. The amount owed can never be more than the value of your home. If your home is sold for less than the mortgage, the rest of the money goes to your estate.

With the downward turn in the housing market, many homeowners are opting to stay put for a few more years.  This isn’t a bad option, as housing values will continue to rise, providing homeowners with additional equity in their house.

But if we’re all settling in for the long haul, why not help edge our equity along?

We never bothered to put in home improvements until a year before we sold our old house.  It was such a waste to make the house more attractive for another family to own it, without reaping the benefits ourselves.  This time, we’re doing things different.

While the country waits for the next upturn in housing sales, build your equity and make a cozy nest at the same time.  Put some fresh paint on the walls, put down new carpeting, re-finish your hardwood floors.  Major projects build major equity too like bathroom and kitchen remodeling, new windows, new siding, and new roofs.

Don’t think you can swing the finances?  Consider taking out a home equity loan, especially if you’ll be staying a while.  Most are tax-deductible and have lower interest rates than credit cards.

Now sit back and enjoy your “new” old house!