What's "Acceptable" and what is "Unacceptable"
to an Underwriter? Part 2 ...
In Part 1 of this post, I answered the mortgage Underwriting questions ...
"Why do I have to explain a late payment, the reason for a collection, or the reason for a prior bankruptcy?" and ...
"Why does an Underwriter care where the money for down payment comes from?"
Today, I continue addressing underwriting questions that I often hear from my clients during their mortgage processing. Questions, that when prepared for and addressed prior or early in the mortgage processing, safely and more quickly deliver them through their mortgage process into their successful mortgage Closing.
These questions will again address ... what IS and what is NOT acceptable to Underwriters.
"When reviewing my bank statements, why does an Underwriter care about large deposits or unexplained deposits?"
The answer lies once again in documentation. If the funds they are questioning are deposited over and above the normal paychecks, or not traced as transfers from another verifiable
account, the monies could be questioned as cash (remember, cash is a big no-no), gifted monies, or attained by taking out loans (those not reported as debt). They could also be credit card advances not showing on a credit report, as of yet. You can count on ALL the above triggering an Underwriter's attention.
Borrowed down payment funds are "unacceptable", unless those loans funds are borrowed against property owned (Secured by Collateral). The source of the funds for the large deposits must be confirmed. A written, signed explanation will be required from the Borrowers.
Examples of "unacceptable" answers would be:
* My friend owed me money and paid me back with cash.
* My boss advanced me money. I will re-pay him over time.
* I transferred money from another bank, but then I closed that account. I have no "paper trail" or records of that account.
* I deposited cash I had in my safe from home. (Or Safe Deposit Box)
* I had monies stored in my mattress, sock drawer, shoe box, etc. ...
All of the above answers typically nullify the use of those funds. They are not "traceable", so they cannot be viewed as valid down payment monies.
The next question addresses something touched upon in my prior post ...
"Why does my Brother (or anyone) have to show his bank account or document the check he wrote for the gift he gave me for my home purchase?"
Underwriters need to see the source of the funds leading up to the gift giving. No matter who or where the monies come from, it needs to be documented! Anyone providing these funds should be made aware ahead of time that this is normal practice for Underwriting and they will be asked to comply.
"Why do I need to verify the clearing of the Earnest Money Check?"
Earnest Money is considered part of the Down Payment. ALL down payment funds must be verified, as per previous explanations.
It is routine that an accounting of savings accounts (statement) is requested during mortgage processing. Something that many Borrowers do not understand is that the account records or statements need to be the most current.
Should your mortgage processing go beyond a 30-day cycle, new savings account records/statements (showing full info, name(s) including full account number) will have to be provided once again to your Mortgage Lender. This new account statement/accounting proves verifiable funds and activity within that account during the time period.
I can't stress enough just how important it is to be prepared for your mortgage processing prior to its start. Just being aware and educated regarding the expectations and demands of the process will help to make the process go more easily and quickly for you.
One of the many reasons too of why it's so very important to work with a Mortgage Lender that will take the time to answer your questions and help you prepare for what lies ahead when financing your home. Ask those questions. Prepare well ... and you'll soon be living in your successfully Closed home.
* Thinking of Buying a home or Refinancing? Contact Me. I'll put my 35+ years of mortgage experience and expertise to work on your behalf.
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