Several factors can prevent a mortgage loan from closing on time – or from closing at all. Those reasons include loss of a job or changing jobs, failing to pay bills on time, making application for a new credit card, or making a credit purchase that changes the borrowers’ credit scores.
But one reason stands out as the single most common. That’s the inability to document the source of the borrower’s assets.
Let me tell you a story from a few years ago when me and the wifey decided to consider investing in multi-family property units. It was hell then, and the process has only tightened and gotten harder now. Today, lenders require that every deposit on your bank statements be documented and verified. They want assurance that the money belongs to the you and that it was not borrowed from some other source – such as a family member who wouldn’t report the transaction to the credit bureaus.
Some deposits, such as automatic deposits of wages or social security checks, are automatically verified. But if you deposit your own paychecks, you need to be able to verify that source. If you sell something and deposit that money in your account, you need to have a copy of the bill of sale showing who gave you the money and why. Be sure to have your purchaser sign his or her name and include contact information.
If your loan type allows for the use of “gift monies” in your transactions, you need to show who gave you the gift. And more – the person who gave the gift may have to verify where they got the money.
Transfers from one account to another pose yet another problem. Often spouses have separate checking accounts, but pool their money into one account for loan purposes. That’s easy to document through your bank statements, but can become a problem when only one spouse is on the loan.
Since some loan programs require that 5% of the money for closing belong to the borrower, unless the borrower is listed on his or her spouse’s account, a gift from a spouse is treated like any other gift and reduces the balance that can be considered “the borrower’s own funds.” There are various such information that one needs to learn about when applying for loans. Find all the information that will help you on Mammoth Investor.
Sometimes there’s a good reason why only one spouse is making application for a mortgage loan – and why that spouse shouldn’t be on a joint account. If that’s the case, contributions by the other spouse to the “down payment fund” should be made at least 90 days prior to the loan, so that the funds can be considered “seasoned” and thus not subject to documentation.
When you want your loan to close on time, cooperate with your mortgage banker.
We don’t make the rules, but we do have to follow them. So provide all pages of the required bank statements, and provide the documentation to show where each and every deposit came from.
Begin keeping good records long before you choose the house you want to buy. Attach your deposit slip to each pay stub and any bills of sale. Store them with your bank statements for easy reference when you’re asked. If you work in an industry that provides you with tip money, keep a record of the dates and amounts of tips for each day. Store that information with the deposit slips and bank statements as well. If you receive money from online sources, print and keep documentation of every receipt, and reference it to your deposits.
Mike Clover
Texas Mortgage Banker
www.mikeclover.com
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