When it comes to applying for a mortgage, remember that there's no such thing as a little “white lie.” Saying fibs that you think are harmless, as well as exaggerating, playing down, or failing to disclose certain information, can all jeopardize your chances of getting approved for a loan. Unfortunately, though, about 1 in 131 applications contained some form of fraud, according to the 2022 Mortgage Fraud Report from CoreLogic. Industry experts and risk managers are particularly on the lookout for an increase in income fraud risk. Here we've touched on some of the things borrowers might think it’s okay to lie about during their mortgage application, and why it’s not worth risking your chance to finally buy a home. ### 1. Your source of down payment funds For many first-time home buyers, especially younger ones, saving for a down payment is one of the most challenging. Most lenders need to see that you have genuine or regular savings towards a deposit. If you've received help from your parents or any family member for your house deposit, whether it was a gift fund or you borrowed it and plan to pay it back, don’t ever think it’s harmless to declare it as part of your genuine savings. You will have to disclose the source of your down payment to avoid the risk of being questioned, or worse, being denied on your loan. ### 2. Who will be living on the property Unfortunately, occupancy misrepresentation, or lying about who will be living in the property, is common in mortgage applications. You may think it's okay to claim that the property will be your primary residence when you actually plan to rent it out as an investment property. ### 3. Income and employment details Most lenders require proof of at least two years of stable, long-term employment before granting borrowers a mortgage. So don't be tempted to say you’ve been working at a company for longer than you do or claim to be employed even when you’re not. ### 4. Credit cards, loans, and other debts Whether it's a car loan, credit card debt, or student loan, you need to be upfront about all of your current debts. This is because lenders need to know all your financial burdens to properly assess your financial situation. ### 5. Financial history Lenders will want to make sure that you've been consistent with your past payments to deem you trustworthy and make sure you can handle another financial obligation. But if you’ve got a history of late payments, whether it’s missed credit card payments or late loan bills, it’s a must to share that information. Even if you think those lies may seem harmless, they come with some serious and expensive consequences. So what happens if you're found out? Here are some scenarios you might face: - The lender could downright deny your application.
- If you’re already under contract, your earnest money deposit could be forfeited.
- If the truth comes to light after the deal is done, the lender could decide to call the loan payable.
- The lender could increase your rate as a penalty.
- Worst case scenario: you’ll be charged with mortgage fraud. The biggest lesson: Just be honest from the start so you’ll have a better chance of getting approved for a mortgage.