Updated by Craig Berry
Millions of mortgage applications are submitted to lenders each year. In fact, statistics show there were $820 billion new mortgages originated by banks through the first half of 2018.
When going through the application process for a mortgage loan, your lender needs to learn about you in order to properly assess risk. Some questions loan officers ask may catch you off guard, while others are downright illegal.
Understanding the motives behind the legal lines of questioning, and spotting the types of questions loan officers can't ask -- according to the Fair Housing Act should help prepare you for the mortgage loan application process.
Questions loan officers ask, but shouldn't
Regardless of how your information is collected for the purposes of your loan application, there are anti-steering laws that protect privacy.
Lenders are not permitted to ask any questions that would discourage an applicant. Further, government regulations prevent mortgage lenders from denying loans based on race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
1. Are you pregnant or planning to start a family?
If you're hoping to start a family or have another child, your mortgage lender doesn't have the right to ask you about it. Even if you're visibly pregnant, or if your lender finds out you're expecting through social media or word of mouth, they can't ask you or your spouse about your plans related to working once your baby is born.
The Equal Credit Opportunity Act protects you from lenders using this information against you as part of the mortgage approval process.
Lenders must assume that even if a mortgage borrower or their co-borrower is pregnant, that won't affect their future employment or financial income. When it comes to family-related questions, typically the ones that lenders can ask are your marital status and the number of dependents you have.
As it relates to dependents or children, your lender may ask applicants about children based on the information reported on their income tax returns. Mortgage lenders may consider the additional cost of supporting these people when evaluating the borrower's financial situation.
2. Are you ill or disabled?
Some mortgage applicants think that a mortgage lender may not approve them for a 30-year mortgage due to either their age. Fortunately for elderly mortgage applicants, this should not be the case.
Mortgage lenders are not allowed to discriminate against applicants who are elderly, even if they are 90 years old and taking out a 30-year loan.
If a lender tries to feel you out to see if you're suffering from any serious health problems or questions you directly about an apparent disability, that's a violation of your legal protections.
The Fair Housing Act and the Americans with Disabilities Act (ADA) prohibit discrimination based on health problems. The only instance where a mortgage applicant's age is relevant is when determining if they're old enough to sign legal documents, or if they're eligible for a reverse mortgage.
3. Are you single, divorced or widowed?
Lenders are permitted, and even required, to ask about your marital status. However, they have to be careful about how they ask.
Mortgage lenders cannot ask you whether you're single, divorced or widowed. They can only ask if you're married, unmarried or separated.
When it comes to divorce - it's a personal matter.
For a variety of reasons, including the potential credit challenges which may impact mortgage rates, there's no question that divorce can be a sensitive subject. A mortgage company asking for your divorce decree can leave you unsettled.
Divorce, however, can have financial consequences. These consequences can hurt your ability to qualify for a mortgage loan. For these reasons, if you're separated or divorced, be prepared to provide additional documentation.
Most lenders want to see a copy of your separation agreement if you have one, or your divorce decree. This is because if you're paying alimony or child support, it could impact your debt-to-income ratio.
Do mortgage lenders verify your marital status?
You may wonder -- can a mortgage lender find out if you're married? The answer is yes. Lenders may need this information in order to fully understand your financial obligations and assets.
Lenders can't deny you because you aren't married. Mortgage lenders can, however, ask and verify your status.
While federal law prohibits mortgage lenders from discriminating again you based on your marital status, you must disclose whether you are married and provide information about dependents and divorce.
Know the questions lenders can (and can't) ask
Although they may have you taken aback, there are questions that lenders not only can ask, they're also required to ask.
For example, according to the Consumer Financial Protection Bureau (CFPB), "With respect to most mortgage transactions, a lender or broker may ask for your sex, but only to support compliance with anti-discrimination laws."
The CFPB goes on to say, "If you are applying for joint credit or credit secured by collateral (like a mortgage or home equity loan), the lender or broker may only ask if you are married, unmarried, or separated. The lender or broker may explain that the unmarried category includes single, divorced, and widowed persons."
Lenders can't treat you differently because of your gender, age, marital status, race, color, national origin, public assistance status, or if you filed any complaint under consumer protection laws. They cannot discourage qualified people from applying for a mortgage.
It's important to know your rights when you shop for a mortgage. If you're asked an inappropriate question, report it, then find another mortgage lender.