Buying a house in today's market may seem impossible for many people who long to be homeowners. It can take years to get to the point where a person fulfills all the requirements to qualify for a mortgage, such as paying off debt, saving enough money for a down payment and building good credit.
Certain shortcuts may not seem like a big deal for those who intend to pay their mortgage payments and would never consider defaulting on a loan. Providing incorrect information could result in mortgage fraud charges, though. Here are some ways home buyers have gotten into trouble:
1. Failing to list all debts
Debt-to-income ratio is an important factor when lenders determine whether someone qualifies for a mortgage. If the applicant has tied up so much of his or her income that there is not enough money left over to make a house payment, the lender is not likely to approve the loan.
Misrepresenting the amount of debt one has may seem fairly straightforward, but lenders typically request a number of documents that help them uncover any discrepancies. These include at least two months of bank statements along with tax records, credit reports and other relevant financial documents.
2. Not being honest about the down payment
The amount of down payment a home buyer must come up with varies based on a number of factors, one of which is the type of loan. Borrowing the money may seem like the answer, but then the debt has to be listed on the mortgage application. It may seem like a good idea to borrow the money from a friend or family member and leave that information off, but if it truly is a loan and not a gift, the applicant must include it.
3. Using a straw buyer
Maybe a person with bad credit wants to buy a home, but mortgage lenders will not even consider the application because of bad credit. It may seem harmless if someone else applies for the loan as if he or she plans to live in the home, but the intention is to allow the unqualified applicant to make the payments and live there. The applicant who obtains the mortgage to cover for the true home buyer is a straw buyer. People may also collaborate with a straw buyer to get a better interest rate.
Mortgage fraud is a white-collar crime; the penalties may vary widely depending on the circumstances.