Although it could sometimes be difficult to differentiate between white lies and mortgage fraud, it is crucial for you to know if you want to avoid the consequences. In general, the following are the most common mortgage fraud practices that get home-buyers in trouble.
Hiding the Source of your Down Payment
Yes, pooling cash for a sizable down payment is not always easy for some, so many people resort to borrowing money from family or friends. However, this is still a debt since you would still have to repay it eventually, explains an experienced FHA loan lender.
Industry expert Primary Residential Mortgage, Inc. explained that lenders want to gauge your financial circumstances as accurately as possible before approving your loan since this would impact the available funds you have for making your monthly mortgage payments.
Lying About your Debt
There are sure-fire ways to uncover “hidden” debt, even those that do not show on credit reports. For instance, going through the bank statements you submitted, a mortgage underwriter could spot multiple payments to all sorts of things, flag them, and ask you about them.
Likewise, lenders might also look for hidden debt in public records. Put simply, unless your debt is to your family or friend, prospective lenders would know about it.
This occurs when you buy an investment property and then tell your lender that the property would be your primary residence. Although the money you could from such as arrangement would be a big help, think twice before doing this.
Your lender will determine if the property has multiple units, far from your workplace, or significantly more affordable or smaller than your current home among others.
Likewise, saying that the property would serve as a vacation home, when you are really planning to rent it out, or say that you will live in it when it is really a holiday home is considered mortgage fraud.
There are many loan programs for virtually every home-buyer, regardless of their financial circumstances. You just have to research the ideal loan option for you. And while you might have to spend more every month than you would have otherwise, committing mortgage fraud is simply not worth it.