Navigating the mortgage labyrinth can feel like a high-stakes game of chess. Youre keen to make your move towards homeownership, but what you say to your lender could tip the scales in or out of your favour. Ever wondered if theres a little too much sharing going on during those meetings?.
Securing a mortgage is a pivotal step in your financial journey, and its crucial to present yourself in the best light. But are you aware of the conversational landmines that could jeopardize your chances? Lets dive into the dos and donts of lender conversations, ensuring youre armed with the right strategy to checkmate your way to a successful loan approval.
Sometimes it’s hard to get approved for a mortgage loan. You need to get paperwork, fill out forms, and answer a lot of personal questions about your money. It’s understandable to want the process to go smoothly. But if you say the wrong thing, it could cause problems and make it harder to get a loan.
Here are 15 things you should avoid saying to a mortgage lender when applying for a home loan:
1. Lying or providing false information
This is number one for a reason. Lying on a mortgage application is fraud that can get you in a lot of trouble, even jail time. When the lender checks your papers, even if you don’t get caught, it’s likely that truths and mistakes will come to light. Just be honest—if you run into problems, your loan officer can help you get past them.
2. “What’s the maximum I can borrow?”
Asking how much you’re approved to borrow makes you seem like an uninformed potentially reckless borrower. Aim to only borrow what you need based on a realistic budget. Maxing out your limit now could prevent future goals like starting a family or business.
3. “I sometimes forget to pay bills.”
Consistency is key when managing a large debt like a mortgage. Admitting you forget bills shows disorganization and could indicate missed payments on your credit report. Those are red flags that may lead to a denied application.
4. “I just opened a bunch of new credit accounts.”
It’s tempting to buy new furnishings, but avoid new debts when applying for a mortgage. Numerous new credit accounts look reckless and could alter your debt-to-income ratio at the last minute, risking your approval. Make those big purchases after closing.
5. “My credit cards are all maxed out right now.”
If most of your credit cards have high balances, it makes people wonder how you handle your debt. Lenders often do one last credit check right before the closing, so getting big new debts could hurt your chances of getting approved. Don’t play cards too much until you have the keys.
6. “I change jobs pretty often.”
Lenders want to see at least two years of stable employment to ensure reliable income for mortgage payments. Frequent job changes may signal instability and cast doubt on your ability to pay.
7. “I might switch from salary to commission soon.”
Your current pay structure helps determine approval, so drastic changes are concerning. Transitioning from steady salary income to unpredictable commission introduces too much risk of instability for lenders’ comfort.
8. “I’m getting a cash gift for the down payment.”
For some loans, gifts are okay, but you have to follow certain rules to show where the money came from. Talk to the loan officer about the requirements before you accept the money to avoid being turned down. Never take undocumented gifts—that’s mortgage fraud.
9. Asking about the foreclosure process
Inquiring about foreclosure makes the lender think you expect to default on payments. Even if just curious, save those questions until after your loan closes to avoid raising red flags upfront.
10. “What is a credit score?”
Not knowing your credit score signals that you may not understand credit and are unprepared as a borrower. Monitoring your score and reports should be part of your routine long before applying for a mortgage.
11. “Just tell me how much I can borrow.”
Focus first on determining your budget and actual needs, not the upper limit. Qualifying to borrow a large amount doesn’t mean you should—or that it would fit your lifestyle. Research guidelines like the 28/36 rule.
12. “The loan terms don’t matter as long as I can get this house.”
Downplaying critical loan components like rates and fees suggests poor financial planning. Mortgage terms impact your long-term costs and should align with your goals. Don’t get blinded by a property—the loan itself is a huge commitment.
13. “I plan to flip this place quickly, so I just need short-term financing.”
Mortgages are designed for long-term primary residences, not quick turnover. Stating plans to flip indicates speculative motives rather than commitment. Underwriters may see you as a default risk if your plan falls through.
14. “I might take a break from work soon, so my income could drop.”
Lenders need to see reliable, stable income to ensure you can manage payments. Any mention of your job situation changing shortly undermines that and could lead to a denial of your application.
15. “Don’t worry about the details of my finances right now.”
Full financial transparency is non-negotiable. Ducking questions or withholding documents throws up red flags about what you might be hiding. Your loan officer needs a complete picture, so be open.
Strategies to Maintain a Positive Relationship With Your Lender
Building and maintaining a robust relationship with your lender is akin to tending a garden â it requires consistent care, attention, and an understanding of what helps it thrive. When youre exploring your mortgage options or liaising with a mortgage broker , keeping things transparent with your lender lays the foundation for a mutual trust that can yield significant benefits for both parties.
Communication Is Key. Keep your lender in the loop with any changes to your finances. Its a bit like updating an app on your phone; if you dont do it, youre not operating with the latest, most optimal version.
Regular updates help:
- Foster trust
- Streamline the lending process
- Prevent misunderstandings
Consistency Is Crucial. Ensure youre timely with your documentation and repayments. Like having a friend who always shows up on time; it’s easier to trust and depend on someone who does what they say they will do.
A common slip-up is the underestimation of paperwork involved in mortgage applications.
Heres how you can sidestep this obstacle:
- Gather your documents early
- Keep digital and physical copies organized
- Seek guidance from your broker on whats needed
Regarding different techniques, some borrowers opt for automated payments â a “set-and-forget” method that ensures on-time payments without the hassle of monthly reminders. In contrast, others may choose manual payments to keep a closer eye on their finances.
Incorporating these practices effectively means adhering to a few golden rules:
- Dont Change Your Financial Landscape Abruptly. Lenders may be wary of sudden changes, like getting a new car loan.
- Stay Honest. If your financial situation changes, it’s better to let people know right away than to have problems found later.
Ultimately, the best route is a proactive one. By demonstrating reliability, transparency, and a willingness to communicate effectively, youll foster a positive dynamic that could benefit you in the long run. Whether its getting advice on how to better manage your loan or securing more favourable terms in the future, a good relationship with your lender is a cornerstone of financial wellbeing.
Navigating the conversation with your lender is crucial for a successful mortgage application. Remember to focus on the positives of your financial situation and avoid discussing potential red flags that could jeopardise your loan approval. To keep a good relationship with your lender, talk to them in an open and honest way and let them know about any changes in your finances. By doing so youll set the stage for a smooth lending process and a brighter financial future.
What Not to Disclose
When youre knee-deep in the mortgage process, navigating the waters of what to share and what not to share with a lender can be, well, murky. Imagine youre holding a hand of cards. You want to disclose enough to keep the game fair but keep your best cards close to your chest. In this case, your “best cards” might include sensitive personal financial details that could potentially be misunderstood or disadvantage you.
One mistake people often make is telling their boss they’re thinking about changing jobs or that they have an offer from another company. Lenders prize stability, so even hinting at uncertainty may raise an eyebrow. Remember, theyre looking for assurances that youll be able to maintain consistent mortgage payments over time.
You might also think that discussing your side hustles or freelance work is a plus, but unless youve been doing it consistently for a couple of years and can prove its a reliable source of income, it may raise more questions than confidence.
- Don’t talk about side jobs or freelance work unless it’s been going on for a long time and is well documented.
- Don’t tell anyone about upcoming job changes or new opportunities until they’re official and you can present them in a stable, positive light.
In terms of your financials, youd be wise to keep any recent large purchases or expenditures under wraps unless asked directly. These might signal to the lender that youre not the safeguarding type when it comes to finances.
Practical tip: review your bank statements and prep explanations for any large, recent transactions. Lenders will scrutinize your spending habits, and youll want to be ready to present those big-ticket items as necessary and well-considered investments, not impulsive buys.
And about those credit cards â if youve just applied for new ones or racked up a balance, keep it to yourself. Those are the jokers in your financial hand that can seriously skew a lenders assessment of your reliability.
- Recent big purchases to be charged? Don’t give this information out unless it’s asked for.
- You should not tell anyone about your new credit card applications because they can hurt your credit score and the lender’s decision.
What NOT to tell your LENDER when applying for a MORTGAGE LOAN
FAQ
Is lying to a mortgage lender considered mortgage fraud?
Lying to a mortgage lender is considered mortgage fraud. Providing misleading information on a loan application can ruin your chances of approval. Remember, your goal is to get approval and the best rate available. Lenders are required to perform verifications of key financial documents.
What should I look for in a loan application?
When applying for a mortgage loan, it’s important to consider your debt-to-income ratio (DTI). Small charges are fine, but a lender might run a final credit report close to closing, which could change the loan terms or deny the application. A stable employment history is also beneficial if you have control over it.
What is considered mortgage fraud?
Providing misleading information on a loan application is considered mortgage fraud. Lenders are required to perform verifications of key financial documents. If you’re unclear about what to disclose, let your lender know, and they’ll help you overcome those obstacles.
What if my loan application has a hint of fraud?
Also, if they believe your loan application has a hint of fraud in it, they can file a suspicious activity report (SAR), which could trigger a federal investigation. So, be completely transparent and forthcoming on your loan application.
Why is my home loan application rejected?
That’s because, frequently, when borrowers’ home loan applications are denied by lenders, it’s due to a lack of disclosure or transparency by the borrower. This small “mistake” might not seem like a big deal to the borrower, but lying about the facts is a surefire way to have your loan application turned down.
What happens if you mention a side deal to your lender?
If you mention a side deal to your lender, it’s going to raise major red flags. You shouldn’t lie, though, because if they find out, you could be charged with mortgage fraud, which is a crime.
What is a red flag in a mortgage?
How the Mortgage Application Process Works: Once the application is turned in, the lender will look it over and do a credit check. This is where potential red flags could be raised. Red flags are issues or inconsistencies in the application that could potentially hinder the approval of the loan.
What is the 3 7 3 rule in mortgage?
What looks bad to a mortgage lender?
Avoid applying for or opening new credit card accounts or loans in the six to 12 months leading up to your mortgage application. Don’t close old credit card accounts that are in good standing, since the length of your credit history is a factor in your credit score.