Some borrowers may feel as though it is an invasion of privacy to show their full assets and liabilities position to their lender when applying for a home loan.
When a lender collects your information, they are not doing this to pry into your life unnecessarily. It is an important part of a home loan assessment so that they can be confident you have the finances to repay the loan without a default. It is also a legislative requirement under the National Consumer Credit Protection Act that a lender investigates the full circumstances of a borrower’s situation to ensure the finance offered is not unsuitable. So what are the implications of not disclosing absolutely everything that is asked for?
You may assume that the lenders will only use the information that you tell them, but this is not the case. Lenders complete a number of reference checks, such as on your credit record, to check the information you have given matches.
Understandably, you may honestly forget to give pieces of information, for example, you may have forgotten about that credit card that you no longer use, or interest free facility that has been paid but not closed. If they ask, dig out the details so they can be included as a liability. If you don’t need them any more close them and give them details of the closure.
Purposeful non-disclosure like not declaring existing debts or children that you have 50% custody of, can affect not only the outcome of the current loan application, but also any future applications you may make for credit. You may find that if the lender believes you purposely withheld information that they will automatically decline your application.
There can be other situations also which can cause you to have issues or delays during your loan approval process. For example, the source of your deposit funds may not seem like a big deal to you, however lenders have strict policy requirements around what may or may not be acceptable. Lender want to see that you have genuine savings either in cash or equity so if these funds are from an inheritance or windfall of some sort, then they would not count towards funds you have saved from your income. Finding out during the process that the funds actually came from a different source could cause not only delays in your application, but could be a reason for the loan to be declined.
To avoid getting in this situation and forgetting to disclose something, go through all of your finances thoroughly and ask your lender to provide a detailed list of the information they need so that you can check each requirement off one by one. It is always best to disclose everything, even if you don’t understand the relevance – and let the lender make the decision.