Buying a house, to put it mildly, is hard. There are a rash of decisions to be made, from deciding what community you want to live in and choosing a real estate agent to determining just how much house you can afford and how much you want to put down. It's a nerve-wracking experience, to be sure.
But everything we've just mentioned can be a picnic compared to the conversations you're going to have with your mortgage lender.
Mortgage lenders might disagree -- after all, they're just like you and me -- but in their office, behind their desk, wearing that smart suit or tie ... well, they have power. A lot of power. And that can make anyone nervous.
So before you meet with your mortgage lender, open your mouth and regret the words that spill out, take a look at our list of the three worst things you could say to a mortgage lender.1. 'I Have to Apply Quickly. I May be Out of Work Soon.'
Frankly, if you're going to be losing your job soon, buying a house probably isn't the best move at this point. Making those payments will be a nightmare, not to mention the upkeep. And while you should be applauded for your honesty -- and you should definitely be honest with the lender -- there isn't a lender on the planet that wants another foreclosure on their books.
"You want to be revealing but not too revealing," suggests Ethan Ewing, president of Bills.com, a personal finance site that offers tools and advice to help people find ways to reduce their mortgage, debt, credit, insurance and other bills. No, Ewing isn't advocating that you lie about your circumstances, but you do want to think about what information you're providing. When you're talking about your future with a lender, stick to the short-term future and not the long-term.
"If you're planning, for instance, to quit your job and sail around the world for a year," says Ewing, "this isn't the time to mention that. If nothing else, things change, and you don't know that you'll actually go through with that idea 12 months from now."
But your lender, not knowing this is a pipe dream you've been threatening to go through with for years but only if you somehow become filthy rich, will naturally assume that's your plan, and that your mortgage payments will fall further down your list of priorities. And so you won't get the loan.
Before you open your mouth and start rambling, think seriously about what you're planning to reveal. Above all else, never lie. Just about the worst thing you can do is to inflate your income or tell a lender that your hefty down payment is something you've been socking away for months or years when it was actually a gift from your parents or a loan from another bank.
"Your lender is going to say, 'Well, that's great that you've saved all this money. We'll need to see your savings account statements from the past 12 months," says Mike Copley, who heads up the retail side (mortgages, credit cards, personal loans) at TD Bank. "It wasn't always this way, of course, but lenders are increasingly skeptical about claims people make and really scrutinize paperwork."
So be honest -- very honest -- but think about what you're saying and how it's going to be interpreted.
2. 'I've Locked in With Three Other Lenders, but I'm Still Weighing my Options.'
There's nothing wrong with shopping around and looking for the best rate you can find, says Ewing. In fact, most real estate professionals would stress that you should shop around.
But, Ewing points out, "Once you lock in a rate, you're committing yourself to that rate. You can get out of it, but it is considered a commitment, and so if you tell a lender that you're locked in with other lenders, they may still want to work with you, but you're probably going to be matched up with the most junior lender in the firm. You won't be taken seriously; you'll be considered a flake."
In which case, be thankful that three other lenders have let you lock in a rate, and give up getting a fourth, at least with this company. They've already given up on you.
3. 'I Don't Know Anyone in the Mortgage Business.'
It sounds so innocuous and hardly a foolish thing to say, but Ewing points out that while the mortgage industry is mostly full of ethical lenders, there's the occasional sleazy individual or enterprise that may try to take advantage of your naivete.
Still, what's the harm in saying you don't know anyone in the mortgage business. Why on earth could that possibly be a bad thing?
Because if you do happen to run into a dishonest lender, you've just flagged yourself as a possible rube or a newcomer to the residential game, and that not-so-honest banker or lender knows they've found an easy mark.
Instead of admitting you're unfamiliar with the mortgage business, Ewing suggests you create a little insurance for yourself by mentioning that your cousin is an investment banker and will be helping you look over your mortgage papers. Or say that your brother used to be a mortgage lender and will want to review your paperwork.
"It may help them mind their P's and Q's," explains Ewing. "They'll know they'll have to justify any fees they charge you."
Geoff Williams is a regular contributor to WalletPop. He is also the co-author of Living Well with Bad Credit and the author of C.C. Pyle's Amazing Foot Race.
The Three Worst Things You Can Say to a Mortgage Lender