Show me your assets! Yep that’s what I said.
I’m talking about your assets to close!
If you or anyone you know is planning on buying a home, you need to read this.
In addition to a credit check, verifying your income and inspecting the property, your mortgage company will be verifying your money.
Stated income and stated asset loans have pretty much fallen off the face of the earth, and investors have gotten stricter when it comes to verifying your assets.
Now what is going to be verified? Since things have gotten very challenging, it’s best to assume that they will verify anything and everything regarding checking, savings and retirement accounts for the previous 2 months. We will need to show exactly where all the money is coming from for the down payment and closing costs. Any large deposits must be documented. In the past, some investors would consider anything over 1,000 as large. Now it’s anything over and above your normal payroll/income deposits. We will request the last two months bank statements when you apply and you will need to keep us updated throughout the process as you receive more statements. RECENT CHANGE: As long as the large deposits don’t exceed 25% of your Gross monthly income within the month, it is no longer considered a “large deposit” that needs to be documented. So keep checking your statements for any deposits that are not payroll deposits and be aware of what might be questioned.
If you are applying for an FHA loan, you are allowed to get a gift from a family member for the down payment and/or closing costs. However, it must be fully documented with a gift letter, and proof of transfer from the donors account to your account. The most recent change is that FHA is requiring us to document any large deposits that may be in the DONORS account prior to the transfer of the gift. So you can no longer give cash to your brother and have him gift it back to you because there is an obvious cash deposit right before the transfer. If you do have cash or “mattress money” and don’t plan on purchasing for more than 3 months or more, deposit it into your account as soon as possible so that it’s been there for at least 90 days before you need to apply for the loan.
If you are applying for a conventional loan, you will need to document that 5% of the sale price is from YOUR OWN funds which is being used for the down payment. You must also show where the money is coming from for the closing costs (which can be a gift) PLUS two months reserves. Reserves are to show that you have at least two months mortgage payments in the bank after you purchase the home. Again, any large deposits must be fully documented. RECENT CHANGE: Conventional is now allowing the 5% down payment to be 100% gift money! But the above gift requirements still stand.
If you are applying for a VA loan, there is no down payment required, but the closing costs must be documented and can be a gift or paid for by the seller.
In the past, as long as we DOCUMENTED that you had the funds, you could just show up with the money from anywhere else and it wasn’t questioned. Now, we need to show the actual withdrawal from the exact same accounts that we verified when you go to closing. For example, if we verified 10,000 in your savings and 2,000 in your checking and you wired 12,000 from your savings because you made a transfer in order to wire for closing? You will need to show the transfer from checking to savings before the loan can fund.
Sellers contributions towards closing costs can be used, but vary from loan to loan. Check with your loan officer at the time of pre-qualification.
So although it may sound daunting, as long as you are educated up front and have all your money in place, it won’t be so difficult down the road. The best thing to do is get it in a savings account and keep it there! Don’t be transferring money back and forth and driving your mortgage company, realtor and yourself nuts trying to figure it all out.
