The Temptation to Fudge
If you are shopping for a home, it is understandable that you would want to present your financial credentials in the best possible light. However, you may also encounter tighter lending standards than you would have in past decades. As a result, it is more important than ever to present both good credit and sufficient income to pay a mortgage.
Since early 2012, the Office of the Superintendent of Financial Institutions (OSFI) Canada has been putting pressure on mortgage lenders to apply more stringent underwriting standards in approving mortgages to prospective borrowers. As a result, you may be tempted to exaggerate your income in order to appear more credit worthy. If so, you would be in good company; nearly forty percent of borrowers artificially boost their salaries applying for credit, according to a report released by credit reporting agency Equifax.
Nonetheless, providing inaccurate income is a bad idea. Savvy lenders will likely thoroughly check out your application, so it’s unlikely that you would get away with your deception. Even if you are successful in obtaining a mortgage, you may regret your decision later.
Black Marks and Deception
Quite bluntly, deliberately providing inaccurate income information on your mortgage application is illegal. It is considered to be a form of mortgage fraud. If the prospective lender discovers your deception during the application process, expect your mortgage application to be flatly turned down. In addition, you will probably find it difficult, if not impossible to obtain a mortgage or approval for any sort of credit for years afterward.
Many couples receive financial assistance from relatives or from other sources in financing the down payment for a home, which is perfectly legitimate. If you say nothing, prospective lenders will likely assume that the money was drawn from savings accumulated from your income or drawn from other personal assets. However, deliberately concealing the fact that a down payment was a gift for a grant is also a form of mortgage deception.
If you receive down payment assistance from an unscrupulous source, you may ultimately wind up overpaying for your mortgage. In such cases, the agency providing the grant may artificially inflate the amount of the mortgage by asking the seller to sign documents raising the purchase price. Another questionable practice of such agencies is requiring borrowers to deposit down payment assistance funds into their personal bank accounts rather than applying the funds directly to the down payment in order to deceive mortgage underwriters.
The Risk of Losing Your Home
Providing inaccurate information on a mortgage application may also set the stage for financial hardship down the road. If you are successful in obtaining a mortgage, you may wind up purchasing more house than you can actually afford. As a result, you may find that more and more of your income is being eaten away by mortgage payments. Worse, if you were to suffer a serious illness, a job loss or some other financial setback, you may find yourself unable to keep up with your mortgage payments. In such situations, foreclosure becomes a real possibility.
Donald Ayers has extensive experience as a personal finance consultant. He enjoys passing on his tips and ideas about saving money through blogging. Visit the http://www.kanetix.ca/mortgage-rates site for more rates information.