Why Mortgage Lenders Require Extensive Paperwork

The reasons that mortgage lenders need such extensive information about your finances to be satisfied about your ability to pay off the mortgage loan. You submit these documents to prove and substantiate your current financial status not only to the mortgage lender but also subsequently to other organizations that may buy your mortgage if the lender sells your mortgage in the second market, as many of them do. Pay stubs, tax returns and investment statements help document your income and assets. The lender assesses the risk of lending the money and how much they can lend you based on your financial stability.

The lenders cannot just take the word of the borrower because they have no way of knowing who is honest and who is not. The result is that lenders have to assume that all loan applications may lie given the opportunity.

You should not consider lying on your mortgage loan application. Although even some mortgage brokers in the quest to close more loans and more commissions may even advise buyers to do so, it is not a good idea. The number one reason why it is not a good idea is because you are very likely to get caught. One example of the way people cheat on their mortgage on application is by creating bogus tax returns with inflated incomes. The mortgage lender has several methods in which to trip you if you lie. If the mortgage is able to determine that you are lying on a mortgage application your application will get denied, anyway. in case you do not fit in the criteria of the lender to qualify for a mortgage on it, maybe it is for your own good. Mortgage lenders have a smart way of figuring out whether you can really afford to take on the home loan without the risk of foreclosure in the future or not. If the lender does not think you are an adequate risk, then perhaps you should wait for some more time and build up your financial resources before you take on the additional burden of mortgage.

Falsifying loan documents is committing perjury and fraud is not something you want to do. When you sign the IRS 4506 form, it allows the lender to request directly from the IRS copies of the actual tax returns that you filed. Falsifying your income on the application will be caught.

Even if you do lie on your application and get approved for more that you can really afford, you are liable to face foreclosure in the future and if not, the burden of debt can be severe if you have borrowed more than you can actually afford. If you’re short on a down payment alternatives are always available.