Would I Lie to You? Why Honesty is ALWAYS the Best Policy When it Comes to Mortgage Applications

If you’re having a Jack Nicholson from ‘A Few Good Men’ moment and thinking that your broker “can’t handle the truth”, let me reassure you that as brokers we’ve seen and heard it all – so whatever your situation is – good, bad (or ugly) the more information shared upfront, the quicker we will get to a proposed solution.  If Tom Cruise can handle the truth, then so can we.    

                                                                                       
There’s a tendency sometimes to try and self-promote by putting a rosy filter on certain situations, editing out key information or worse yet, omitting details altogether.  Much like using that flattering ten-year old-photo for your online dating profile or shaving a few kilos off your driver’s license weight – the desire to show ourselves in the best possible light is simply human nature.  The problem with that is when it comes time to get Pre Qualified, your broker may not understand the full picture and might be left feeling a little bit catfished.

If you’re asking a mortgage professional to run numbers for you but forget to disclose that $400/month student loan or $15,000 balance that snuck up last year on your MasterCard, the numbers that the individual provides you with could end up being way off base.

Not to mention credit issues – I’ve definitely had clients in the past swear up and down that their credit is perfect, only to pull it and find lots of recent late payments and outstanding collection items.

Credit, (kinda like that exaggerated online profile), can’t be hidden long and will most certainly come to light when your mortgage application goes live, so keeping your advisor in the loop regarding any credit challenges is key to a successful approval.

Often times, the omissions are completely innocent and driven by a lack of communication as to what’s included in a mortgage application as debts, so if you’re curious as to what’s included in your mortgage application check out this blog post  https://www.valleymortgagebroker.com/blog/what-is-included-in-my-mortgage-application-as-debt

A few things to keep in mind:

-Open credit (like lines of credit and credit cards) usually require 3% of the outstanding balance to be included (i.e., $15,000 Visa balance is a monthly liability of $450)

-Some lenders will also take a payment on the limit of any open credit (whether it’s used or not)

-If a debt is joint (i.e., you co-signed for a family member or opened a Bay card with your boyfriend) it doesn’t matter who’s paying the bills because you BOTH are responsible for the debt, so the payment is included

-Deferred debts (i.e., no interest store cards and student loans) are included even if not in repayment

-if you signed on another mortgage that full payment is generally included (even if the payment is shared with someone who is not on the new application)

From a Credit Perspective, a few things to ALWAYS be upfront about:

1. Late payments: if there’s a cluster of late payments due to a life situation then share as much detail about the situation with your advisor – the clearer the picture they can paint the more comfortable the lender will be that the issue was indeed an isolated incident.  But beware - late payments that pop up regularly over the years are not considered isolated – they are considered habitual, so help your advisor understand the why behind whatever is happening there.

2. Collection items:  these don’t go away until you deal with them (even if that gym’s cancellation policy was bogus) so let your advisor know if you might have any that need to be addressed

3. Write-offs (phone bill, hydro bill, credit card): this is where the facility was so many payments behind that the lender closed it and (probably) sold the debt to a third-party collection agency.  Keep in mind that even if no corresponding collection item is showing these items don’t just magically disappear so the lender will likely need the situation addressed.

Credit issues can happen for all kinds of reasons and trust me when I say that as brokers we’ve seen and heard it all, so the more you’re able to share the better.  If there are errors on your credit bureau there are steps that can be taken to correct these and addressing issues head-on rather than running for them will give lenders more confidence in your future commitment to repay.

Another situation to be careful of?  The temptation to embellish.  So, let’s say that part-time job you mentioned is really only casual on-call with no guarantee of future work, but your super sweet and well-intentioned boss agrees to inflate your position and income on the job letter for you.  This is called ‘fraud for shelter’ and can have some serious consequences.

At the end of the day, the information is what it is so let your advisor do the work to come up with a solution based on your unique situation, rather than trying to take matters into your own hands. 

Honest and upfront information leads to candid conversations and quicker and clearer potential solutions.  There’s nothing worse than working on assumptions and having undisclosed issues sneak up and sink a deal. The more your advisor knows upfront the more they can manage your expectations and give you a realistic view of what’s available out there to meet your needs.

Questions?  Let’s talk.