Your Bank Account is Key

Hello and welcome back to news you can use. This month, we're talking about the mortgage loan process and today specifically, we're going to dig into the importance of your bank account to the transaction.

 So, mortgage lenders along with your pay stubs and your W-2s and your taxes need to look at your bank statements to make sure that you are receiving income that's consistent with the income documentation that you've provided.

 They’ll be looking at your deposits and especially at any deposits that are considered large, so anything over a thousand dollars, that's non-payroll and any deposit that would be larger than your normal paycheck and you'll be called upon to document where did that money come from because what the lender and the underwriter are trying to make sure of is that you're not using borrowed funds which could change your debt to income ratio for your down payment and your closing funds.

 So be prepared to provide a couple of months of bank statements and to give information to your lender on anything that they need to source that they see in your bank account. Some other considerations if you have a

joint account and the other person or persons on your account are not

part of the loan. They will be called upon to us to write a letter or otherwise document that you have full use of all of the funds in that account and then just a word to the wise, you're going to want to establish that you have enough funds for your down payment and your closing costs.

 And it makes a lot of sense to get that money into one account prior to starting the mortgage process so that everything is in one place if the lender sees that you're making transfers which is very easy to do electronically these days between accounts that you have at the bank

then a deposit to another account or a transfer from another account is going to lead to you having to provide the bank statements for that other account.

So gather your down payment and your closing funds together in one account. Typically, the one that you get your payroll deposited to and then when you make your earnest money deposit on the contract distribute the earnest money from that same account so you want to try to centralize all the funds that are related to the transaction into one account.

Let's see what else. If you are using gift funds, a parent or another relative is giving you money to help you close. That has to be documented and where lenders tell me they see a little hitch is that the person borrowing the funds from mom or dad for example, don't inform mom or dad that mom and dad are also going to have to provide their bank account to show that they had enough money to give that gift so make sure that if you are using gift funds, the person granting you that gift is fully aware of the documentation responsibilities they will also have.

Lastly, if you are liquidating a retirement account, stocks and bonds or some other kinds of funds to provide money to help you in the transaction. Be aware that you'll need to show the source of all those funds and it makes a lot of sense to go ahead and put those funds into the same account where you already have your other closing funds, and make sure that you can document that your earnest money deposit on the contract came out of that account.

So here are just as a recap of a few do's and don'ts when you provide your bank statements to your lender. Do your best to download it from your bank system as a pdf so that all the pages are there if it says this is page one of five, all five pages need to be there even if one of those pages is blank and make sure you keep copies of all the checks that you've deposited in case you need to show them to your lender.

And more than anything else, please respond quickly to all of the requests that your lender makes because if you don't provide all the documentation, your loan could get stalled in one stage or another of the process and you won't realize it but you're just not making any progress.

The other thing is to don't make any large deposits to your primary account unless it needs to be deposited for your transaction. Don't make any unnecessary transfers between accounts because then you'll just be called upon to document those other accounts and please don't overdraw your account. That would not be a good thing to have happen during the loan process and get those gift funds into your account early because the documentation process takes a few days and you don't

want to have to be handling those one or two days prior to closing.

It could very easily delay your closing so that's it. I hope that this information has been helpful. If you need more information or have other specific questions, feel free to reach out to me if you have questions about this or any other real estate related topics.