4 things not to lie about on your mortgage application

But when you apply for a mortgage, all existing debts — including money owed to family — are evaluated by the lender. The lender wants to know that you can afford to take on a home loan, too.

Some applicants might be tempted to submit a phony "gift letter" claiming that a loan is really a gift that won't have to be paid back. That way, they can qualify for a bigger mortgage and buy a larger home.

If this deception is discovered, everyone involved could potentially be prosecuted for committing fraud.

2. Fudging your work history

Typically, lenders want to see that a mortgage applicant has had two years of steady employment, since this implies reliable income and presents less risk of that a homebuyer will default on a loan.

Some applicants embellish their employment records to claim longer employment periods and higher earnings, or they may even say — falsely — that they own a small business.

None of this messing with the truth is likely to work, since lenders will ask to look at tax returns or records that confirm actual income and tax payment history.

Even if the fibbing isn’t found out right away, it could cause problems later if the homebuyer winds up with a mortgage that's too much to handle. Owners can lose their homes and seriously damage their credit history.

3. Leaving some debts off the list

Debt-to-income ratio is a big part of how a lender determines a buyer's eligibility for a home loan.

Some people try to leave a few debts off their mortgage application, so it looks like they owe less than they do or that they have lower existing monthly debt payments.

But this tactic rarely works.

Mortgage brokers and lenders always run a credit check, and any debt — including car loans, student loans, medical bills, personal loans and old credit cards — will be discovered immediately.