Many people are tempted to lie on their mortgage applications because some believe it is the only and right way to get approved. However, there are better, more honest ways you can boost your mortgage approval instead of lying. Exaggerating certain mortgage information or lying about your situation is considered mortgage fraud, and can have dire consequences on your application.
The things people tend to lie about include:
• The person living on the property
• Your deposit source
• Employment history
• Amount you earn
• Person borrowing and the one repaying
Most of the time, the bank pays the price when homebuyers are untruthful in their mortgage application. However, the bank won’t be the only one to suffer from the false information you provide.
If you think your “little white lie” is not significant, ensure you learn about the consequences and tangible and intangible costs involved. Speak to an independent mortgage advisor, such as Cardiff-based Eden Hawk, for advice on your mortgage application.
Can you lie on your mortgage application?
Yes, but you shouldn’t try. Mortgage lenders are keen these days, and they carry out several stringent checks before granting a loan. They will ask for specific documents to verify your income and personal information.
You may succeed in hiding some information in the initial stages, but the lenders will catch up on you during the underwriting stage. It is not advised to lie on your mortgage application as it is classified as mortgage fraud.
The lender can call the entire loan.
It is terrible to lose the chance of buying your dream home and have your earnest money forfeit. However, it is not yet the worst thing to happen to you when you lie in your mortgage application. You can get worse consequences if your lies are exposed after the deal is already done.
The lender has the right to call the loan as payable when he or she discovers you lied in your application. Therefore, you will have to pay the loan in full or face foreclosure. Also, the lender can choose to change your mortgage terms by either upping your monthly payment or increasing the interest rates. That will have grave consequences, especially for the long-term loan.
Denied loan application
The most common lie for most mortgage applicants is overstating income. You should not assume the lender won’t know later. These days, most lenders are clever enough not to take your word for it. The mortgage rule states that the borrower should be able to repay the loan before getting one.
Your assets and debts can come under scrutiny aside from the income. Therefore, trying to dispute financial obligations that you are aware of or manipulating bank deposits to look like you have more money than the reality cannot go unnoticed.
If the bank realised you have been exaggerating or laying down some information, they could deny your mortgage application immediately.
If you are under a contract, you could be out of your earnest money. Earnest money is always between 1% and 3% of the buying price.
That is a lot of money you are risking for white lie sake.
Facing criminal penalties
Mortgage fraud is not just the intention of deceiving the lender or how to do it. Whether the lie is small or big, it falls under criminal activity, and there are charges for that.
For example, under federal law, you can be fined up to $1 million for mortgage fraud. At the state level, the fine varies depending on the classification of fraud as either misdemeanour or felony.
In the worst-case scenario, you can serve a real-time in prison if found guilty of mortgage fraud for up to 30 years. Unless you are fond of matching orange jumpsuits, try and refrain from lying on your mortgage application!
The cost of buying will hike
Lenders are hurt in many different ways by mortgage fraud. First, the possibility of losing money is very high if the lies lead to the buyer‘s foreclosure. Depending on the property and mortgage value, the loss can amount to tens of thousands of dollars for just a single property.
Also, the loan investor could expect the lender to purchase the mortgage back, which is another financial hit. To make the situation less hurtful, the lender may pass on the buyer‘s cost using higher interest rates or fees.
A minor increase in your interest rate can deplete your wallet significantly; now, imagine a higher closing cost. Closing costs are fees paid when signing off on a loan and are between 2% and 5% of the home‘s value.
That is unfair to buyers who are ready to fill out their mortgage applications. Still, it is the perfect scenario of why using untruthful information on your mortgage application doesn’t pay.
Lying on a loan or mortgage application is not a great idea. Even for a small lie, you can serve time in prison, killing the mortgage deal, or even lose your money, and it is not worth it.
