Reduce approval stress with cash-to-close tips

13 06 2011

Why would an underwriter even care where I got my closing money? 

I have enough money, what is their problem?

So tell me again, why do I need to get copies of my deposits for the last two months?  Arrrggggghhhhhhh!

 

Underwriters care.  They care a lot.  They care about putting immaculate loans on their books, loans that they can sell without issues, loans that are so clean they read like a Dick and Jane book.  They don’t necessarily care about your home or your situation.  Which means that they can make your life difficult if you’re unprepared. 

One of the big challenges on a loan is verifying the cash to close.  Oftentimes this can make you feel like you’ve just been inspected by the TSA on your finances.

But really, it’s simple.  Underwriters want to make sure that no one takes out a loan to use as the down payment for another loan, and they want to make sure that money isn’t changing hands illegally in the transaction—ie the seller giving you money for the down payment, etc.  That’s all—no domino chains of loans and no under-the-table deals.

Here’s what they typically want: one or two recent months of bank statements to show how much you usually average, and the source(s) of your recent deposits.  If there are no irregular, non-payroll deposits and your ending balance and average balances are within one paycheck of each other, you’re usually fine.

If there are a lot of irregular deposits, we switch to plan B: use a Verification Of Deposit or show where each deposit came from.  A VOD is a mini-statement from your bank that tells us your average and ending balance.  If these are similar, we can usually just use this and avoid getting cancelled checks for the random deposits.  Sometimes, though, an underwriter may request the full bank statements and verification of the source of all deposits.   Remember, they want to show the money used for the down payment wasn’t borrowed and didn’t come from the seller.  In this case, we’ll get a copy of the deposit slips and the cancelled checks that made up the irregular deposits, write a short explanation on the deposits, and move on.

The idea is simple, but things can get complicated right before the closing if you submit an updated bank statement that has weird deposits.  The best plan is to be proactive– keep copies and explanations of all your non-payroll deposits.  This way, you can have a simple, smooth loan process.

Here to help,

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