Little White Lies That Can Hurt Your Mortgage Approval


Not everyone qualifies for a mortgage loan, and if you think there’s a chance you won’t qualify, you might be tempted to exaggerate or fudge information to become a more desirable candidate. A little white lie may result in an initial approval, but the lender will learn the truth. And unfortunately, the truth can jeopardize your mortgage approval.

Lenders take a gamble with every home loan. Even if an applicant has a job and good credit, there’s always a chance that he’ll run into hardship and be unable to pay his mortgage at some point during the term.

Lenders only approve those who meet their qualifications, and they don’t take the information you provide at face value. Instead, the bank asks for supporting documentation and verifies all information presented. If a bank learns you purposely lied on your application or submitted false information, it may refuse to do business with you.

Here are three little lies that can hurt your approval.

  1. Lying about your earnings

Exaggerating or slightly inflating your income may not seem like a big deal. However, mortgage affordability is based on your monthly income, and fudging numbers by a few or several thousand dollars makes a difference in how much you actually qualify for.

Mortgage lenders don’t take any chances. The bank will ask for W-2s, tax returns, and some lenders will call your employer to verify how much you’re currently earning. If the bank learns you earn less than your stated amount, this could result in qualifying for much less, which can limit purchasing power.

  1. Lying about the amount of your down payment

It’s important that you’re truthful about the amount of your down payment. Your down payment can determine the types of mortgage programs you qualify for. If you say you’re going to put down a certain amount of cash, your mortgage lender will expect this amount at the time of closing. Showing up on the day of closing with less cash can cause a delay. Also, you must be forthcoming with the source of your down payment. Mortgage lenders will request your most recent bank statements to verify assets. If you’re receiving gift money from a relative to cover your down payment, make sure your lender knows ahead of time. There are specific rules for gift funds.

  1. Lying about how long you’ve been with your employer

Two years of consecutive employment is typically required when financing a home. This includes two years with the same employer and in the same field if you’re a salaried or hourly employee; and if you’re self-employed, you must produce at least two years of tax returns for your business.

If you’ve only been with your employer or self-employed for one year, be honest with your mortgage lender. This doesn’t necessarily mean you can’t qualify for a loan. Some banks maintain their own portfolio of mortgage loans. If the lender doesn’t plan to sell your mortgage, the bank may approve your mortgage although you only have one year of employment history.