Lenders know from experience that where there’s smoke there is often fraud.
Even after the ‘dark’ period where you’re waiting for the Mortgage Commitment you can still be surprised by the number of conditions that the lender places before they’ll actually complete your mortgage. They can ask for extra paperwork, more proof and a frustrating number of hoops to jump through.
You just supplied a hard drive’s worth of documents and now the lender wants more. Why?
The average price of a home in Canada has skyrocketed in the last 10 years. The average mortgage size has grown with it. Canadians are desperate to own homes, borrowers have indicated ‘fudging’ their numbers and a lot of money is at stake.
Lenders have to be diligent in weeding out the bad actors and making sure that their mortgage funds are helping honest, law-abiding Canadians. They are scrutinized too.
Here are just a few of the “red flags” for a Lender when they are looking at your paperwork
Lender Red Flags
Letter of Employment – are there any spelling mistakes? Is all of your fundamental employment information (start date, job title, pay, etc.) accurate with what was submitted on the application?
Paystub – does the annualized amount match up with the Letter of Employment? Is the paystub prepared by a professional, third party?
Phone Call to The Employer – in most instances the Lender calls your employer to confirm details. If there are differences in what the workplace contact confirms, as compared to what they expect, the flag goes up.
Large inflows or outflows of money on bank statements – if there are, expect to be asked for supporting documentation to account for it.
Is the ownership clearly visible – are there transactions that might suggest a “different” story than what was presented on the application?
The Lender knows that a certain number of Mortgage Applicants have made honest mistakes. Some have made dishonest ones.
They have no way of knowing which group you fall into. They just know from experience that where there’s smoke there is often fire.
What to do to reduce scrutiny
Hire an experienced mortgage broker – good brokers will scrutinize your paperwork for you so that simple omissions or mistakes are caught before they get to the lender.
Don’t drag your feet on supplying your paperwork – You’ll save yourself a great deal of stress later so that you aren’t trying to secure a mortgage on the day you buy the property.
Cooperate and be patient – Everybody is pulling in the same direction and wants the transaction to succeed.