Stated-income mortgages allow well-qualified business owners and commission-based borrowers to state their income instead of proving it traditionally.
People sometimes think that inflating their stated income on the application will improve their odds of approval. Here are 10 reasons why you should give your head a shake before attempting it:
The underwriters reviewing your application are smart, perceptive, and very instinctive when it comes to misrepresentation.
Lenders are good at picking up inconsistencies in applications. (Are you thinking of stating a $200,000 income to go with your maxed out credit cards and minimal net worth? Forget it.)
Many lenders have computer models programmed to detect income discrepancies.
Lenders expect a certain number of borrowers to lie, so they look for it.
Lenders have megabytes of statistics to help them figure out what you should be earning.
If CMHC declines your stated-income application, that means you’re declined with CMHC everywhere–not just at the lender you applied with.
If you cannot qualify using traditional income verification, and you get declined because of questionable income, you may not be able to get approved at all! In other words, if you have to use a stated income program, you sometimes only get one shot to qualify.
If lenders find income inconsistencies at the last minute, they can withdraw your approval and you could be left without financing right before closing.
Misstating income is fraud! Penalties for fraud over $5,000 can hurt.
You already know this, but it’s bad karma to lie.
If you have questions about what self-employed income to use, talk to a mortgage professional. The rules are pretty clear and they can walk you through them.