Claiming to earn more money than you actually do to get the house of your dreams seems simple enough. In a few instances, a lender might even encourage you to inflate your earnings or suggest that you leave the amount blank. But the penalties for lying on a mortgage application or committing mortgage fraud outweigh the benefits of an expensive house.
What Counts as Lying
You can commit mortgage fraud in several ways. A common lie on mortgage applications is falsifying the amount of income you earn, at least for lenders that don't require proof of income in the form of tax returns or pay stubs. Some people also lie about their employment history, the down payment, and how much debt they have. All of these count as fraud. You also cannot lie about your intentions for the house. For example, if you plan to rent it out, you cannot say you plan to live in it yourself. Predatory lenders might encourage you to lie or leave blanks on the application, which they fill in with inaccurate information. Be wary of any lending agent who encourages you to lie -- they are encouraging you to commit a crime that could land you in prison.
Jail and House Arrest
One penalty for committing mortgage fraud is hard time. According to the Federal Bureau of Investigation, the penalty for lying on a mortgage is up to 30 years in federal prison. In August of 2011, a former New Jersey police officer received six months in prison after he failed to state that he owned another house on his mortgage application. Instead, he claimed that he rented the house he actually owned in an attempt to get a mortgage on a second house. After his jail sentence, the man was also sentenced to six months of house arrest.
In addition to or instead of going to prison, you might be ordered to pay fines if you commit mortgage fraud. The former New Jersey cop had to pay a fine of $529,779 in addition to the time he spent in prison and under house arrest. According to the FBI, fines for mortgage fraud can range up to $1 million, either with time in prison or on its own.
Avoid fraud and its consequences by not lying on a mortgage application. Be truthful about your income and your intentions for the house. If you get caught lying, you might have to pay the entire amount of the mortgage right away, even if you do not go to prison. To protect yourself from a lending agent or mortgage broker who might not have your best interests at heart, do not leave any blanks on a mortgage application. You do not want to be held responsible for a mortgage you cannot afford or be the potential victim of fraud.