Should You Disclose Child Support on a Mortgage Application?
Not sure if you should disclose child support on mortgage applications? Lenders have tightened their underwriting standards and now need more information in order to make an informed lending decision. Many analysts feel that homeowners overborrowed on their homes and lenders gave them loans they couldn’t pay.
Experts advise knowing which questions can and cannot be answered while applying for a mortgage with a mortgage banker, mortgage broker, or your local bank.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 establishes stricter guidelines for mortgage brokers. As part of the Safe Act, mortgage brokers and bankers must pass a federal exam as well as a state exam before they may practice. They must also pass a federal background check, give their fingerprints, and adhere to state-specific credit requirements.
What Does Mortgage Broker Do?
A mortgage broker gathers information from an application on behalf of a lender who will decide whether or not to issue the loan. According to Debra Killian, head of Charter Oak Lending Group, “a mortgage broker cannot underwrite or approve a transaction.
A mortgage banker is one step above from a mortgage broker in that they submit your application to a lender for underwriting. According to Donald Frommeyer, president of the National Association of Mortgage Brokers, mortgage bankers fund their own loans.
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Anti-steering standards prohibit loan employees from discouraging applications, regardless of who receives your information. This is according to Mortgage Bankers Association President David Stevens. “A loan officer should never pre-screen a potential borrower. The goal of not discouraging you is to get rid of any potentially prejudiced characteristics of financing.”
Here Are 10 Things You Shouldn’t Hide on a Mortgage Application
Nonetheless, human nature being what it is, some borrowers believe they can still trick lenders and defeat the system. They’ll do the following:
1. Hide a Bankruptcy
Bankruptcies and foreclosures can stay on your credit report for up to ten years, so it’s essential to tell your lender if you’ve filed for bankruptcy in the last ten years.
You have nothing to conceal if your bankruptcy was triggered by a job loss or a health problem. Especially you’ve since reestablished good credit.
Even if your bankruptcy was caused by reckless spending, it’s still a good idea to disclose your bankruptcy early in the loan process. Lenders dislike being surprised at the last minute.
2. Hide unreimbursed business expenses on their tax returns
Paying union dues, buying employment uniforms, or enrolling in night classes to better your career. These will all be deducted from your reported take-home income, potentially affecting your qualifying debt-to-income ratio.
3. Cover up a business loss
According to the Bureau of Labor Statistics, about 5% of working Americans have several jobs to make ends meet.
These jobs range from handyman work, tutoring, and computer repair to cleaning horses. Most moonlighters declare losses from their start-up enterprises on their taxes, which will be highlighted by your lender.
4. Increase their credit card debt
Pre-approval for a mortgage does not entitle you to charge a new automobile or furniture for your new home on your credit cards. When you apply for a mortgage, you attest that your credit has not altered.
A credit check after signing this certification will warn your lender (alarmed).
5. Fail to disclose an ownership interest
Self-employed borrowers often have to provide more documents. To avoid this requirement, some applicants list themselves as employees rather than co-owners.
6. Exclude alimony or child support payments
It may be a painful and delicate subject. Regardless of the extent of your debt, your lender must be informed. Even about child support related debt. This is why you should disclose child support on mortgage application.
7. Bury a silent second mortgage
A borrower without a down payment can commit mortgage fraud. They do this by handing the seller an unrecorded (or recorded after closing) quiet second mortgage.
8. Downplay a large deposit
A big deposit will need to be adequately documented by bank statements. This includes copies of checks, bills of sale, or gift letters (showing your funds need not be repaid).
9. Fail to file tax returns
Lenders frequently utilize an independent copy of your tax returns to corroborate the information on your loan application. So they’ll need your most recent tax return.
10. Neglect to mention a job change
Depending on the source, between 8 and 9 million people lost jobs during the Great Recession. You should be employed to pre-qualify. They also want to know how long you’ve been there.
They’ll ask for proof of employment up until your loan is approved to ensure you’re still employed and generating the income you claimed.
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