Creating a Paper Trail to Document
Funds for Your Mortgage Closing
It used to be years ago, that couples ... husbands, wives, and even the kids ... kept their financial accounts together in one bank, one savings account, and typically just one checking account. I know my parents and my wife's parents certainly did it that way.
But these days, multiple accounts in multiple institutions is the norm. Each individual often maintains their own accounts: savings, investment, retirement, and credit.
They maintain and pay their own personal accounts, plus they've divided the responsibility for payment of household bills. The household may have multiple checking accounts too.
No, Americans no longer conduct finances as simply as they once did. "Simple" doesn't come close to explaining the finances of my Borrowers seeking a Mortgage.
Except for those that are young First-Time Home Buyers, Credit Reports typically trace pages of credit history. Mortgage Applications show a list of open accounts for each applicant.
In today's Mortgage Process: Applicants are called upon to verify accounts and account balances.
They also must verify and explain account activity, not just the balance ... meaning deposits, transfers, or withdrawals that may have taken place within those accounts.
Those account activities are many times referred to as its "paper trail".
Documentation, or the "paper trail", has become increasingly important to the modern Mortgage Process. Underwriters are sticklers about them being concise, making sense, being easily understood, and easily followed.
The demands of producing documentation and a "paper trail" can be challenging for Mortgage clients. The gathering and verifying of accounts can seem tedious and time-consuming.
So how does a Borrower minimize their "paper trail"? A little preparation prior to and during the Mortgage Application/Process will help circumvent much of the problem.
Limiting the number of accounts utilized leading up to the Mortgage Application definitely helps. Continuing to use a limited number of accounts throughout the Process will help too.
It must be remembered that the ultimate goal in providing Bank Statements is to satisfy the amount of funds required at closing. That includes: Verification of the Earnest Money Deposit and that the deposit has cleared the account.
Important: Making your Down Payment on the purchase of your home from that same account is wise, and can limit the amount of documentation needing to be produced.
Keeping transfers of money to a minimum and making them only as needed is also wise. Too many money transfers make an Underwriter nervous and raise red flags ... not to mention, it also creates the need to explain and document those transfers.
Make sure: To maintain good records of all accounts utilized. Keep each and every page of the record of your monthly bank accounts ... even if it has just a page number at the bottom, as it WILL be required by an Underwriter.
I can't tell you how many times delays have been caused by this seemingly minor detail. (As a rule of thumb, when documentation is concerned, NOTHING is a minor detail anymore. See the list of documentation typically needed for Mortgage Application HERE.)
Creating a Paper Trail to Document Funds for Your Mortgage Closing. All the info and suggestions above speak to why it's so important to speak to and work with a Mortgage Originator well in advance of the time when you hope to start searching for a home. Allow yourself at least 6 months to a year, if possible.
You'll be better prepared and educated as to the best way to proceed throughout your home buying transaction. And you'll also be positioned to navigate the Mortgage Process quickly and easily, having to produce the smallest "paper trail" possible ...
* Hoping to Buy or Refinance a Home in the Chicagoland area? Contact Me today! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed #216987
American Portfolio Mortgage Corp.
Cell or Text: 708.921.6331
Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan,
Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
Referrals are Welcomed and Greatly Appreciated!