If you are getting pre-approved to buy a home and the lender does not ask you specific questions about the source of the funds you plan to use for closing costs and the down payment, they may be missing a very important piece of the pre-approval process that can cause problems later on.
Source of the Down Payment Funds
One of the first questions I ask borrowers is, “What is the source of the funds you will be using for the down payment?” The reason I am so concerned with this is that verification of assets has become one of the most scrutinized areas of underwriting in the last few years.
In order to use funds in the loan process, the source of any funds appearing on bank statements in the last 60 days must be verified. The lender will request documentation to show where the funds came from and how they got into your account – i.e. by check, wire transfer, etc.
Disallowed Down Payment Funds
Many borrowers accumulate funds and do not deposit them into a bank account or receive gifts of cash from others that have not been deposited. These are instances in which those funds will not be allowed to be used for the home purchase. If you have funds held in cash and anticipate buying a home, remember to deposit them into a banking institution at least 60 days before beginning the mortgage application process.
Gifts from Family for the Down Payment
Gifts from family members are acceptable sources of funds as long as they can be verified. This is often a sensitive subject as family members will be required to show bank statements or documentation to show where the funds came from.
Limiting Movement of Funds Lessens Documentation
We also tell our borrowers to limit movement of funds from one account to another as this just adds to the documentation that must be provided to show the movement of funds among accounts.
We would be happy to answer any questions you have and help you be prepared for obtaining financing for your new home. Call Marimark Mortgage at 866-910-8020, or contact us online.