Experienced Criminal Defense Attorneys

Generous parents or mortgage fraud? Don’t fall into a money trap

On Behalf of | Jun 25, 2023 | CRIMINAL DEFENSE - White Collar Crimes

You and your spouse finally found the home of your dreams for your young and growing family. But things are still a bit tight with the prices of real estate these days. 

So, you are quite grateful when your parents offer their help to allow you to buy the house you chose. They don’t mind offering you an interest-free loan to ensure that you wind up owning the house you desire. It’s all good, right?

Make sure the terms are crystal clear

If your parents are giving you a sum of money to buy the property, that is a different circumstance than if they are loaning it to you, even tax-free over an indeterminate repayment period. If the money is indeed a loan, this must be disclosed to your lender. Failing to do so could get you charged with mortgage fraud.

Why that’s considered fraudulent

When a lender decides to loan someone money for a home purchase, they carefully evaluate that person’s creditworthiness. They compare their income and financial resources with their monthly expenses and bills. They want to ensure that the homebuyers won’t default on their loan and lose the property in foreclosure.

An undeclared loan from a parent skews the numbers, and not in favor of the lender. Sure, your parents may be fine with lending you the money under the table now, but what happens later? Families squabble all the time. What if there is a falling out and they demand payment or need the funds themselves in an emergency?

That’s why banks require full disclosure. If you find yourself in this type of hot water, you will need to launch a robust defense against any allegations of mortgage fraud.