Would you ever fib on a mortgage application? Have you ever? Findings from a new Equifax survey suggests that Canadian millennials are more willing to do so than the general population.
Just under 23% of millennials believe it’s acceptable to inflate their annual income when applying for a mortgage, compared to just 12% of the general population. This is called mortgage fraud. If you fabricate or exaggerate any information in order to improve your chance of approval, it’s considered fraud.
Nearly 20% of millennials said they have not been entirely honest on a credit or loan application, compared to the national average of 12%. While 53% believe mortgage fraud is a growing problem, 51% also believe that it’s more likely conducted by organized crime. Among millennials 56% believe organized crime is the root of mortgage fraud.
“It’s concerning that so many younger adults we surveyed believe it’s OK to inflate their income to purchase the home they want,” says Julie Kuzmic, Director of Consumer Advocacy at Equifax Canada. “Fudging income numbers when completing a mortgage application is fraud. It also becomes a slippery slope for these people who may end up stretching themselves too thin.”
“Failing to make mortgage payments in full and on time can negatively impact your credit history and credit scores,” adds Kuzmic. “What some may see as a little white lie during the mortgage application process could have legal consequences or become a very hard lesson for people to learn if they cannot keep up with their mortgage payments.”
Only 16% said that mortgage fraud is a victimless crime, but not surprisingly, nearly a quarter of millennials considered it victimless.
When you applied for a mortgage, did you check your credit score? Turns out fewer people are taking this step. A whopping 60% did not check their credit scores before approaching a lender, compared to 68% in 2014. That said, buyers today are more likely to know their credit scores (40% in 2019 compared to 23% in 2014).
Credit scores typically range from 300 to 900, with 660 being considered good by most lenders. Generally, a credit score of 600 to 680 would be a minimum when applying for a mortgage. If your score is lower, you need to take some steps to improve it before applying.
Equifax also discovered some interesting tidbits about housing prices and affordability. For some reason, 61% of those surveyed believe foreign investment is the principal cause for higher housing prices. From April 2017 to June 2019, foreign investment accounted for roughly 2% of total home purchases in the Greater Toronto Area, one of the most expensive markets in the country. Can 2% of the transactions really make that much of an impact on housing prices? We think it’s time people stopped blaming foreign investment on rising prices.
Nearly 80% said the government has to do more to improve housing affordability, and 70% said more needs to be done to help first-time buyers. We’re not sure if the survey had info about the federal government’s new First-Time Home Buyer’s Incentive, but even that has proven controversial in its potential effectiveness.
With regards to the mortgage stress test, almost half of the respondents would like to see the policy relaxed and 38% want it eliminated completely. We think it’s safe to say that the stress test won’t be completely removed, but there’s always the chance that it will be adjusted, though the federal government hasn’t shown any signs of budging.