Sometimes what seems really easy, isn't! One of the requirements in underwriting your mortgage approval is the verification of assets. Simple, right? Not always.
We need to verify where your down payment and closing costs are coming from. We also need to verify any reserves that are required in your mortgage transaction. Typically that is done with 2 months of bank statements. If you have money that is coming out of retirement funds or a money market account, we will also need to verify that. If you have all your money in a savings account, but write your earnest money out of a checking account, we will need to verify both accounts.
The problem comes when you are moving money around and there are large deposits. Underwriters (and investors) do not like to see large deposits unless they can document them. You will need to show where the money came from in order to be able to use it.
If there is a large deposit and it's a gift from a family member, we will need to document the gift. Your loan officer will provide you with a gift letter and we will need to see the cancelled check from the donor. If you are doing a FHA mortgage, we need to document that the person giving the gift had the ability to give you the gift. So you will the gift letter, plus a bank statement showing the donor had the funds to give you.
Try to avoid large deposits into your bank account when you are in the mortgage process. Your paystubs may be automatically deposited and that is easy to track. If you do not have automatic deposits, you may need to give copies of each paystub so your lender can document the deposits.
If you transfer money back and forth between different accounts, try not to do that during the mortgage process. I have had clients with several bank accounts and we need to show where each deposit came from and get bank statements from each account.
The biggest concern underwriting has is that the money you are using for your down payment is your money. We need to know that there isn't a new loan that can affect your ability to make your mortgage payments. We also need to know that there aren't any side agreements where the seller or maybe the real estate agent is giving you money to be used in the transaction.
The best plan is to have your money you need for the down payment and closing costs in an account that you don't use. If you have to write your earnest money out of another account, that is ok, just know that we will need to document it. Be prepared to give your lender at least two months of bank statements and also show that the earnest money was cashed. If you aren't sure about how much money you need, ask your loan officer. Let your loan officer know if you are concerned about large deposits. Make sure you keep copies of checks that you deposit into your accounts.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage and Equity Consultants – Email – Website
