{"id":245,"date":"2015-07-20T18:38:28","date_gmt":"2015-07-20T18:38:28","guid":{"rendered":"https:\/\/clarksvilletnrealestateforsale.com\/?p=245"},"modified":"2015-07-20T18:38:28","modified_gmt":"2015-07-20T18:38:28","slug":"7-common-lies-that-can-totally-destroy-your-home-buying-chances","status":"publish","type":"post","link":"https:\/\/clarksvilletnrealestateforsale.com\/?p=245","title":{"rendered":"7 Common Lies That Can Totally Destroy Your Home-Buying Chances"},"content":{"rendered":"
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<\/i>Home<\/a> > Advice<\/a> > Finance<\/a><\/div>\n
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FINANCE<\/a><\/span><\/div>\n<\/header>\n
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7 Common Lies That Can Totally Destroy Your Home-Buying Chances<\/h1>\n<\/div>\n
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By<\/span>
\nCredit.com<\/a><\/span><\/p>\n

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\"Liar<\/a>
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Dori OConnell\/istockphoto<\/p>\n<\/figcaption><\/figure>\n<\/div>\n

Let\u2019s start with the (blatantly) obvious: Getting a mortgage and buying a house involves a lot of money. And the answers you give on your mortgage application have a direct impact on how much money you\u2019ll get approved for<\/a>\u2014or whether you\u2019ll be able to get the loan in the first place. So it\u2019s not surprising that some people may be tempted to fudge the facts just a bit.<\/p>\n

After all, it\u2019s just paperwork, and a little white lie. What can it hurt?<\/p>\n

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A lot, actually. In fact, it can make the process\u00a0downright excruciating.<\/p>\n

To begin with, the phrase \u201clittle white lies\u201d is a bit of a misnomer as far as mortgage applications are concerned. If you\u2019re fudging the facts in a way that affects your costs or ability to get the loan, that small untruth is likely to turn into a whopper. And since lenders verify most of the key information on your application, your chances of getting away with it aren\u2019t very good to begin with.<\/p>\n

What are the possible consequences? Getting turned down for the mortgage is the least of them. If your falsehood is discovered after you get the loan, your lender could boost your interest rate or even demand immediate repayment in full. Tax-related falsehoods could get you in trouble with the IRS.<\/p>\n

In addition, penalties for mortgage fraud\u2014which is what lying on a mortgage application is\u2014range as high as 30 years in prison and a $1 million fine. You likely won\u2019t face a penalty like that for a small exaggeration or omission, but you could still end up with a fine and a conviction.<\/p>\n

The following \u201cwhite lies\u201d might seem fairly harmless but could get you into hot wateronce the truth comes out<\/a>.<\/p>\n

1.\u00a0Who will live in the house<\/h2>\n

This is one of the most common. A person applies for a mortgage to buy a home as their primary residence when they actually plan to rent it out as an investment property. The benefit is that lenders charge higher interest rates on loans to buy investment properties than they do for a primary residence.<\/p>\n

The borrower might think, \u201cWhat difference does it make? A loan is a loan. I\u2019m responsible for it either way.\u201d But lenders know that default rates are higher on investment properties than they are on primary residences\u2014people try harder to keep up the payments when their own homes are on the line\u2014and that\u2019s why they get lower rates than investors do. Minimum down payments are significantly larger on an investment property as well.<\/p>\n

From the lender\u2019s perspective, you\u2019re stealing money from them by making them take on more risk than they agreed to. And risk costs money.<\/p>\n

And don\u2019t assume your lender won\u2019t find out. There are several red flags that can tip them off. Buying a home in a neighborhood that doesn\u2019t fit your socioeconomic profile is one. Another would be if your mortgage statements are being sent to a different address than your new \u201cprimary residence.\u201d Either might cause your lender to send someone to investigate.<\/p>\n

2.\u00a0How much money you make<\/h2>\n

It\u2019s really hard to exaggerate your income on a mortgage application. For one thing, your lender is going to verify all of the financial information you provide on your application, so if your tax returns, bank statements, W-2 forms, and the like don\u2019t support your income claims, you won\u2019t get the loan.<\/p>\n

The tax return is the big one. Your lender is going to request copies of your two most recent ones, and will obtain them directly from the IRS\u2014you can\u2019t simply alter your own copies and try to submit them. If you do, your lender is going to wonder why your copy and the one from the IRS don\u2019t match.<\/p>\n

People who are self-employed sometimes feel they have a bit more room to fudge things, since they\u2019re reporting their own income. But again, your tax return is going to tell the tale. You might exaggerate your earnings on the profit-and-loss statements from your business, but unless those also match up with your tax returns, you\u2019re going to have a hard time getting your lender to buy those figures.<\/p>\n

3. The origin of your down payment funds<\/h2>\n

Here\u2019s one that many borrowers think is harmless: You\u2019re short of cash for a down payment<\/a>, so you ask a family member to front you the necessary funds, and pay them back later. What\u2019s the harm in that?<\/p>\n

The problem is that when you apply for a mortgage<\/a>, you need to disclose all your other debt obligations on the application\u2014and that loan from a family member is one of them. It represents part of your financial burdens that will compete with your mortgage payments for your financial resources. So your lender will want to know about it.<\/p>\n

If you receive down payment assistance from a relative or anyone else, most of the time your lender will want you to provide a letter from them stating that the funds are a gift and do not need to be repaid.<\/p>\n

4. Undisclosed incentives\/rebates<\/h2>\n

In some real estate transactions, borrowers and lenders are tempted to \u201csweeten the pot\u201d by making a side deal apart from the declared sale price of the home itself. Often, this is in the form of a rebate or kickback from the seller to the buyer when the asking price is greater than the buyer is willing to pay.<\/p>\n

The seller may offer to cover the buyer\u2019s closing costs above and beyond what is normal and declared. In some cases, the seller\u00a0may even cover the buyer\u2019s down payment. Such arrangements may be allowed in some situations, but what makes them fraudulent is when the lender is out of the loop\u2014when they\u2019re done separately from the official sales transaction and without the lender\u2019s knowledge.<\/p>\n

The harm here is that the lender is being tricked into financing more than the actual sale price of the home\u2014so the lender is\u00a0taking on more risk than expected and would have a harder time recovering the money in the event of a default.<\/p>\n

5. A bogus co-borrower<\/h2>\n

In some cases, a borrower who doesn\u2019t earn enough to qualify for the desired mortgage may seek to enlist a bogus co-borrower. The co-borrower, often a relative, falsely states that he or she\u00a0plans to occupy the residence and contribute toward paying the mortgage, and so his or her\u00a0income is counted toward qualifying for the mortgage.<\/p>\n

The party who really gets hurt with this one are\u00a0the co-borrowers. Even if they aren\u2019t actually contributing toward the mortgage, it\u2019s listed as an obligation on their credit report. So if they later decide to buy their own home or take out some other large loan, it\u2019s going to hurt their debt-to-income ratio.<\/p>\n

In addition, they could get stuck with the loan itself if you\u2019re unable to keep up with the payments, since they also signed off on the loan. Not only that, but any payments you might miss will damage their credit as well, since both of you are equally responsible for the mortgage.<\/p>\n

6. Your employment status<\/h2>\n

People will sometimes be tempted to stretch the truth a bit when it comes to reporting their employment on a mortgage application. For example, claiming you\u2019ve been working for a company for three years when you\u2019ve been there for only one\u2014because lenders want to see at least two years of steady employment before approving a mortgage (changing jobs in the same field is OK).<\/p>\n

In other cases, they may claim to own a nonexistent small business or get a friend to pose as an employer for whom they work at least part time. But neither of these will help unless your tax returns support the income you claim.<\/p>\n

7. Hidden liabilities<\/h2>\n

One of the keys to getting approved for a mortgage is your debt-to-income ratio. That is, how much of your earnings you have to pay out each month to cover all your debt payments. So some borrowers will omit listing certain debts on their mortgage application to try to make it look like they owe less than they do.<\/p>\n

This rarely works. For one thing, just about all established creditors\u2014banks, credit card companies, auto lenders, medical services, etc.\u2014are going to report your debt and payment history to the credit-reporting agencies. Your lender is going to pull your credit history when you apply for a mortgage, so it\u2019s\u00a0going to find out about it.<\/p>\n

This is also a great reason to check your credit reports before you apply for a mortgage, too\u2014to know what a lender will see. You can\u00a0get a free credit report summary every month on Credit.com<\/a> to watch for important changes, and you can\u00a0get free annual credit reports from AnnualCreditReport.com<\/a>.<\/p>\n

Similarly, some borrowers may try to game the system by taking out a large loan just before the mortgage closes\u2014perhaps by using a cash advance on a credit card\u2014and hope it doesn\u2019t show up in the credit-reporting system before the mortgage is closed.<\/p>\n

However, when you sign off on a mortgage, one of the things you sign is a statement that the information you\u2019ve provided is accurate to the best of your knowledge. If you took out a big loan the day before, the information on your application is no longer accurate\u2014and that\u2019s mortgage fraud.<\/p>\n

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This article was written by\u00a0Kirk Haverkamp<\/a><\/span><\/span> and\u00a0originally published on Credit.com<\/a><\/em>.<\/p>\n

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