Client Asks the Broker to Inflate Income
A self-employed borrower in Red Deer reports net income of $61,000 on his most recent Notice of Assessment but claims $24,000 in cash jobs that 'never hit the bank.' He asks the broker to state income of $85,000 on the application because 'everyone does it' and the bank 'will never check.' The broker knows the lender requires two years of NOAs plus business bank statements for self-employed applicants, and that the stated income must be supportable by documentation. The borrower's down payment is $45,000, of which $20,000 is a gift from his parents with no signed gift letter yet. The borrower says he will 'get the letter later' and pressures the broker to submit tonight so he can firm up an offer with a deadline tomorrow.
1. How should the broker handle the request to state $85,000?
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The broker must decline. Stating income that the borrower cannot document is a misrepresentation to the lender, regardless of whether the borrower believes the cash jobs are real. The broker's obligation is to submit information that is accurate and verifiable; the lender's underwriting depends on it, and the broker is the party presenting the file. The broker should explain to the borrower that the $24,000 can only be included if it can be documented - for example through business bank deposits, invoices, or a lender that accepts alternative income verification - and should explore those legitimate routes. If the income cannot be supported, the broker should present options that fit the documented $61,000, such as a smaller purchase or a different product, rather than submitting an inflated figure.
2. What must happen with the $20,000 gift before submission, and what is the risk of submitting tonight?
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The gift must be documented with a signed gift letter confirming the funds are a gift, not a loan, and identifying the donor and the amount, and the lender will typically require evidence the funds exist and have been transferred or are available. Submitting tonight without the letter means the file is incomplete and likely to be returned or declined, wasting the borrower's deadline. Worse, if the broker submits with an unsigned or promised letter and the file is later audited, the broker has certified documentation that did not exist. The broker should tell the borrower plainly that the deadline cannot be met with an incomplete file and that rushing increases the chance of a decline; a short extension request to the seller is a better outcome than a misrepresented application.
3. The borrower says 'everyone does it.' How should the broker frame the refusal?
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The broker should be direct and non-judgemental: the issue is not what others may do but what the broker is licensed to do. Inflating income exposes the borrower to consequences too - a declined application, a rescinded approval at funding, or a finding that the mortgage was obtained on false information - and exposes the broker to discipline and loss of licence. Framing the refusal around the borrower's own risk, not just the broker's, is more persuasive and more honest. The broker should then redirect to a constructive path: documenting the cash income, adjusting the purchase price, or using a lender whose product fits the documented profile. The broker should also record the conversation, because a borrower who later claims the broker suggested inflation is a real risk.