Pain In The Assets!

Is this how you feel about the process of obtaining a mortgage?????

I would be exaggerating if I said that it is much like this problem above, although not by much! In today’s nervous mortgage underwriting world, things are much more difficult than they were 5 years ago. Luckily, the experts at MN Home Loan Partners can help you navigate through the mortgage pre-qualification maze! For the sake of this blog post, we will focus mainly on assets and how those play into your mortgage prequalification.

While we can address both personal assets and gift funds from family members,  the first and foremost concern of any mortgage lender/underwriter is:  “Can this borrower afford this home?”

The general rule-of-thumb to determine if you have enough money to come to closing is by reviewing a minimum of 60 days of bank activity and verifying that your average balance is in the neighborhood of your current balance.  When there is a large discrepancy between those two numbers we investigate and try to find the source of the additional funds present in your bank account. Typically the only acceptable source of funds is your “own” money.  What does that mean you ask?  That means funds from your job.  Not funds from a credit card advance, not a loan from your significant other, not a loan from a bank, not money someone “paid you back”, etc…..  Just the money that you earn.

There are loan programs that allow your family to give you gift funds to use at closing.  But those gifts need to be verified. We must verify the entire transaction.  That means starting with proof that the giftor has the ability to give you that gift, by getting a statement proving the funds are there.  Next showing the funds leaving that account, then show the funds going into your account.  Or better yet, just getting then in the form of a cashier’s check that can be brought to closing with you. The great news is that it’s still acceptable for your mom, dad, cousin, best friend, clergy member or even a life-long neighbor to give you money for down-payment! BUT…we need to prove a few things. FHA requires that we track every deposit to make sure the seller, or agents or any interested parties are not giving you the funds to purchase the property that you are buying.

 So what happens when you get a birthday card from Mom and it has a $100 check in it?  Normally you would deposit this in your bank and go shopping!  Not true during the processing of your loan file.  Cash is not acceptable at all! Don’t deposit it during the loan process, or even 60 days prior. The time just before you get preapproved and leading up to closing you must keep your bank account free of any non-payroll deposits unless addressed by your Mortgage Professional BEFORE you make the deposit.  This will save everyone time and paperwork!

Now here are some general tips to make your loan process go more smoothly:

We need ALL pages of ALL accounts you’re providing to us (many banks have a blank page at the end of the statements that say: “This Page Left Blank Intentionally”…. yes, we need that too).

Cash to close funds should be verifiable in your account at least 1 week prior to closing.

Don’t transfer money back and forth between accounts.

Keep track of every deposit you make if it’s not an automatic payroll deposit. Keep copies of checks and deposit slips for any deposits that you do make.

If you plan on liquidating any funds from any investments (stocks, Roth IRA, 401k, etc), please let your loan officer know so they can advise you on what we need.

Although today’s lending environment is much more hesitant and apprehensive, it has become that way for a reason. These tightened standards are designed to keep the bad guys from doing bad things. Since we only work with the good guys, verifying information is simply part of the way of doing things. If you follow these tidbits of advice, your loan process won’t be a pain in your assets.

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