Freelance musician Joe Mosello wanted to get a lower mortgage rate. But, he says, because his income is unpredictable and he co-signed his children's college loans, everywhere he turned he was told he was a poor credit risk. Then he got mail from a company in California.
"They said that they could help us," said Mosello. "After hitting a brick wall with all these other banks and online things, we jumped at it."
Mosello says the company promised to get him a lower mortgage rate but asked for $3,500 up front.
"In most cases, it is illegal for a company to charge you anything before they have offered you a loan deal in writing and you have accepted it," said Tobie Stanger of Consumer Reports.
The Federal Trade Commission is investigating deceptive mortgage ads and has created fake ones based on real come-ons in order to warn consumers.
Some red flags include promises like "guaranteed approval" or "low fixed rates" with no details or ads that look like they're from a government agency.
"The FTC and the Consumer Financial Protection Bureau have poured through hundreds of ads, and recently they warned about 30 companies that they may be breaking the law," said Stanger.
Consumer Reports says the best way to get a good loan from legitimate lenders is to buff up your credit score.
You can do this by clearing up black marks and errors with the three credit bureaus, TransUnion, Experian, and Equifax. Experts also advise to pay off as much debt as you can.
It's also worth checking the federal website www.makinghomeaffordable.gov.
For people like Mosello, it may offer some good options.
A good place to start to find a legitimate commercial lender is with a bank or credit union where you already have an account. You can get free copies of your credit report online.