The Application Itself Detects Your Honesty
Most lenders carefully review your loan application. They search for numerical discrepancies, missing information, gaps in dates, inconsistencies, and any whiffs that smell fishy. “Hmm,” the lender muses, “You say you’ve been out of college only three years, but you list no debts for student loans and you report cash savings of $25,000. How did you manage that feat?” . Experienced loan reps and underwriters have examined hundreds of loan apps. Their eyebrows raise easily. If your life story evokes an air of mystery, don’t leave the loan rep in the dark. Turn on the light. Provide firm evidence that you’re traveling the straight and narrow. Even innocent lapses in your application can spell trouble if you do not satisfactorily explain them.
Justify hard-to-believe items. Do not try to slip by an application that intends to deceive. The best lenders would rather solve your income, debt, or credit problems than loan money to someone they do not trust.
In testimony before Congress, the great banker J. Pierpont Morgan was asked:
Q. “Is not credit based primarily on money or property?”
A. “No sir, the first thing is character.”
Q. “Before money or property?”
A. “Before money or anything else. Money cannot buy credit. Because a man I do not trust could not get credit from me on all the bonds of Christendom.”
Take J.P. Morgan’s advice. Don’t play games with the lender. Report all income and debts truthfully. Not only does honesty result in greater borrowing power over the long run, it will keep you out of jail. Lying (or misrepresentation) on a mortgage application subjects you to thousands of dollars in fines and a lengthy visit to federal prison. (In recent years, many commission-hungry loan reps have conspired with borrowers to create “liar’s loans.” We will discuss this dangerous trend in a later section.)
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