Comment by Cerium
3 years ago
Ask HR how you should verify your employment and salary for a mortgage application. I know my company intentionally shares since they ask you to use the work number to send a verification to the lender.
3 years ago
Ask HR how you should verify your employment and salary for a mortgage application. I know my company intentionally shares since they ask you to use the work number to send a verification to the lender.
The whole "verify your salary with employer" process is BS. Lenders can verify income by requesting your tax returns, and N recent pay stubs (source: I own my employer and have verified income this way, since obviously they are not going to call myself up and ask me to verify my own income). This is only about reducing their verification costs. If there needs to be a giant database of everyone's income, the government should run it, and they already have the data.
If you verify with tax returns, it would be easy to borrow money from a friend and count it as income every year just for loan qualification. And then borrow more money from a bank, wait 6 months for seasoning, and use it as down payment to buy real estate.
And if the loan gets sold to the government, it needs to meet government underwriting criteria and the lender has no free will. Especially for residential mortgages: No private business cares about 3% interest on a loan, they sell those to the government and make money on the origination fees.
If you get a hard money loan, they'll only ask for tax stubs but you'll also pay 10-12% interest. If the buy is really good sometimes they don't even care about taxes or ability to repay - they get your equity if you default so who cares if you make a dumb decision? It's mainly the government loans where they really try to avoid defaults.
> If you verify with tax returns, it would be easy to borrow money from a friend and count it as income every year just for loan qualification.
1) Where do I make friends with people who have such large piles of cash laying around they're willing to front me stacks large enough so I can lie and claim it as income on my taxes to inflate the size of the loan I can get? Multiple years in a row?
2) Once I claim it as income, I owe about a third of it to the federal and state governments in the form of.. income tax. Is my friend okay with only getting about 70% of each loan back after each tax season?
I mean, if my rich friend loans me $100K each year, after three years (the number of tax returns I had to show for my last mortgage), He'll have lost about $90K on the deal... wouldn't have just been easier for him to gift me the $90K the first year and I could put it towards my house and then not needed such a large loan in the first place? It'd have saved us all three years of hassle.
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>If you verify with tax returns, it would be easy to borrow money from a friend and count it as income every year just for loan qualification.
Huh? Isn't it fraud to declare something as income that's not actually income? Also, if you declare something as income, don't you have to pay tax on it? So this scheme will mean you have to pay a bunch of taxes you wouldn't have to otherwise. This sounds like the opposite type of fraud people do. People usually under-report income, not over-report it.
"Yes IRS, I made $1T last year." "Ok cool, send us $400B in taxes please."
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If you're "borrowing" money from a friend to bump up your income, you're likely going to bump yourself up into a higher tax bracket and end up paying more money in taxes.
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10-12% is higher than my credit card APR is that really what hard money loans are going for now?!
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Yeah, I used the work number thing to verify my salary for my mortgage.
As in you had to interact directly with work number for that? Or do you mean that lender “magically” knew and pre-populated your salary info during application process?
Not the parent, but my lender magically knew with just my name, position, company, and SSN. FWIW
No, I contacted my work to get my ‘work number’, and then gave that to my mortgage lender.
Great idea!