So, its time to buy your first home. You’re all excited and ready to get started. That is, until you start researching. You’ve found out what information you need to provide to get approved for a home loan, and it scares you. Credit checks, pay slips, bank account details – the works.
For the majority, this all seems like standard practice. However, if there are a few black dots on your credit history that you think might damage your loan eligibility, you might be tempted to bury the evidence.
Here are some fibs you may be inclined to tell your broker, followed by our reasons for why you shouldn’t.
“I’ve never defaulted on my credit card payments”
If this is a lie, you are going to be caught out. Before approving a home loan, a lender will always check a customer's credit history. This is a record of your responsible repayment of debts, showing all your previous loans and credits, as well as indications on whether your payments have been timely or delayed. If a lender notices a default that has not been declared, they will probably be unimpressed. Play it safe; word up your broker first, so they have the chance to explain your circumstances directly to the lender. Alternatively, your broker can advise you of ways to clean up your history before applying for the loan. Be careful; any rejected loan application will further tarnish your credit file with another ugly black mark- just another reason to clue your broker in before applying!
"I've saved the deposit myself"
You don't have any money for a house, but a friend offers you a loan so you can apply for a mortgage straight away. Great idea, right? Nope. Not from a lender's perspective anyway, as this loan will compete with your mortgage repayments, and reduce your ability to comfortably manage your home loan. So you decide to tell a little white lie. The problem is, brokers and lenders deal with applications everyday; they are experts in assessing one's financial situation, so chances are they are going to catch you out. If the deposit is a gift, great, get a signed letter supporting this. Otherwise, loans at 'mates rates' probably aren't the way to go, and lying about it afterwards? A big, big no-no.
"I earn $200,000 a year"
If you exaggerate your salary, you are wasting yours and your broker's time. This snippet of fiction will immediately be thwarted when the lender requests payslips as evidence. Fudging such documents is fraud, and can land you in very hot water. Be honest, and apply for a home loan based on your actual situation. Lending criteria is generally in place to protect you from financial hardship, so you are not doing yourself any justice by cheating the system.
Make sure your broker has all the facts, and don’t make them run in circles to get them. Be upfront, be honest, and your broker will vouch for you when negotiating with the lender. Through honest communication, your broker can provide you with a realistic assessment of your eligibility, and you can work together to find a loan that suits your genuine financial capabilities.