Unless you win the lottery or inherit a huge amount of cash, the odds are good that you’re going to need a mortgage. When it comes time to fill out that application, you may be tempted to fudge the numbers. “A little white lie never hurt anyone,” you might think. Or, “Saying I make a few hundred extra a week isn’t a big deal.”
This, however, is a dangerous mindset. The truth is that lying on your mortgage application can have very real consequences, which may result in fines, jail time and even a felony charge.
It’s also fairly easy for mortgage lenders to figure out the truth, thanks to tax returns and pay stubs. Once your lender realizes the extent of your “little white lie,” their trust in you will be shattered and they’ll have to start the whole process over again, if they still want to work with you at all.
Why do people lie on their mortgage application in the first place? The main reason is that they want to qualify for a larger home loan. A bigger loan, they assume, will equal a larger house in a better neighborhood. This prospect can be very tempting, especially since they’ll be living in whatever house they buy for years to come.
The problem with this strategy is that loans are contingent on income for a very good reason. Lenders and banks want to make sure you can actually afford the mortgage you get. If you lie about your income, you might end up with monthly payments that you can’t make, which will ruin your credit, create tons of stress, and could result in foreclosure. It’s far better to live within your means than build a life based on lies.
An Innocent Mistake
Sometimes it’s not a matter of lying on purpose. It’s far too easy to lie inadvertently on your mortgage application. For many people, the mortgage application is confusing and dense, and the process of filling it out can cause headaches and mistakes.
For example, you accidentally inflate your income by including money earned from bonuses and overtime. While this is part of your income for a particular year, it isn’t guaranteed and should not be included. Your debt-to-income ratio will also be taken into account, including that student loan you’ve been paying for the last five years and may have forgotten about. Because most lenders require a maximum debt-to-income ratio of 43 percent, forgetting a detail like this could throw off the balance big time. Make sure you go over your paperwork carefully with your lender and a trusted friend or partner, and don’t get frustrated by or race through the process. Getting a mortgage takes time, especially when you do it right.
Honesty is the Best Policy
When it comes to buying a house, remember that it’s best (not to mention required by law) to be open and honest. Protect yourself and stick with the truth when it comes to your mortgage application. For more advice about the home buying process, contact one of the talented realtors at Network Real Estate. We know how to make the system work for you – honest.
Neal Johnson is a CMCA, CRB, CNE and GRI-certified, licensed real estate broker at Network Real Estate, which has exclusively served a high volume of property sales and purchases in the greater Wilmington area for more than 30 years. With offices at College Road, Historic Downtown and Pleasure Island, Network’s brokers are widespread and well-versed in this marketplace, making Network a preferred real estate company for first-home buyers and beyond.
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