Applying for a mortgage can be stressful. You’ve scrimped and saved, spent countless hours researching neighbourhoods and property type, have inputted your financials in a mortgage payment calculator. It’s time to get a pre-approval and you’re hoping you’ll qualify for a great mortgage rate.
There is a lot of information that goes into a mortgage application. And it might be tempting to fudge a few numbers to give yourself a better chance of qualifying. However, no matter how small an error or omission on your application may be, it’s considered fraud, according to the Financial Services Commision of Ontario (FSCO).
“To qualify for a mortgage, you need to provide your mortgage agent or broker, or your lender with documents that verify your employment, your assets and your debts,” FSCO says in its fraud prevention advice page. “No matter how small, incorrect information, omissions of information and fabrication of documents are all considered fraud, whether it’s you or your broker/ lender, real estate agent or lawyer that completes the paperwork.”
With March being Fraud Prevention Month, we’ve assembled a list of five things to avoid to help you unwittingly committing mortgage fraud – or get taken advantage of — during the mortgage process.
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Carefully fill out your mortgage application
It’s important to spend the necessary time filling out your application. Make sure to provide authentic pay stubs and letters of employment; accurately report your income and the length of time you’ve been at your job. Make sure all existing debts are disclosed. Also, make sure to truthfully fill out the purpose of your property (if it’s intended as a rental property, don’t represent it as a primary residence).
Ensure your mortgage is offered by a reputable broker or lender
FSCO warns homebuyers to be suspicious of a mortgage if it appears too good to be true. It suggests shopping around for a mortgage and getting a second opinion if you suspect the offer is too good to be true.
One way to make sure your offer is above board, work with a reputable mortgage broker or lender.
Make sure your broker or lender offers proper disclosures
Licensed brokers are required, under law, to provide you with certain necessary information during the mortgage process. This includes; the mortgage rate being offered, the role of the broker or lender, the broker’s relationship with the lender he or she has recommended, any potential conflicts of interest, whether the broker receives any remuneration from the lender, and details on the total cost of borrowing.
Ensure your broker or lender has provided this information during the mortgage process.
Check your commitment letter
Once you’ve been chosen and lender and been approved, you will receive a commitment letter from the lender. It should be stamped by the lender and include certain conditions (such as proving you have the necessary insurance and plans for a home appraisal). FSCO warns that you don’t receive a commitment letter with conditions and terms clearly explained, you don’t have a mortgage.
Have a lawyer look over your contract
A legal professional should look over your mortgage transaction. This lawyer should be working independently of the lender. If you have any questions about your mortgage documents, a lawyer can help explain them – and make sure everything is being done above board.
The Bottom line
“If you misrepresent information on your mortgage application, or allow someone else to falsify documents in your name, you are committing mortgage fraud and the consequences can be severe,” FSCO says.
These are just five things to consider when going through the mortgage application process. It can be daunting signing a large contract, so making sure you’re working with a reputable mortgage professional will help give you peace of mind. For more information on things FSCO suggests to watch out for, check out its page “It may be mortgage fraud if…”