Finance Friday - Do's and Don'ts of the mortgage process

Home buyers are often not aware of how an innocent transaction such as moving cash from one bank to another can create a major problem in their mortgage application process. Below are some of the more common areas the needs special attention:

Don’t Move Your Cash Around

We have to verify all funds for closing, including the source of those funds. Moving assets around can create a paper trail nightmare. The best advice is to leave everything where it is, even if the purpose of the move is to pool your funds for buying the house. Always consult with us prior to moving any funds.

Large Deposits

We have to verify all sources of funds for the transaction. We will be looking at any large deposits into your asset accounts (checking, savings, money market, etc.). You should be prepared to document the source – perhaps a copy of the paycheck, bonus check, money from a sale of an asset, and etc.

Selling Something

If you are selling and asset such as a car, antique, baseball card collection, etc. to come up with the cash for closing, please document the asset including the check the buyer gives you, car title, and a bill of sale. In certain circumstances you may need to get a certified appraisal of the item.

Gifts

Gifts from relatives are a very common item in the purchase of a home. However, there are certain ways a gift needs to be handled as to not create a paper trail nightmare. If you are going to receive a gift hold off receiving it until we have talked. Please carefully follow the instructions on the lower portion of our Gift Letter Form.

Become a Paper Hound

Save all of your bank statements and paystubs from now until closing as they will be required. Please keep them handy either in a paper file or digitally.

Do Not Pack Away Any Financial Papers

Keep all of your tax returns, along with W-2’s, 1099’s, and K-1’s and any other financial papers from the past 2 years in a handy place. If you sold a home in the past two years, have your Settlement Sheet (HUD-!) handy. You may have to produce an item that you did not expect.

Credit Cards/New Debt

Do not apply for any new credit because the creditor will show up on your credit report and we will have to verify that there is not a new outstanding debt. If you are planning to pay debts off prior to closing, hold off until you have spoken with your processor or loan officer. We may be able to pay off these debts at closing, with no effort to your approval process. If you have recently paid off debt it may not show on your credit report. Please be aware that to verify each creditor’s balance will require more time.

Bringing Funds to Settlement

At settlement your title company will require funds to be in escrow at or before your settlement date. A wire of funds into the escrow account of your title company is preferred. Confirm any arrangements necessary to do this several weeks ahead of time with your bank. Send your wire 2-3 days prior to your settlement date. A title company will allow you to wire the estimated amount that I provide you on your Loan Estimate and to use a personal check for the amounts below $1000. Not all title companies allow you to use the estimate or to use a personal check for any balance due. If you choose to do a cashier’s check, it is to be made payable to your title company. Be sure to contact the title company of your selection in advance of settlement to verify their policy on funds required at settlement.

For additional questions, don't hesitate to reach out to us at themattnadergroup@baycapitalmortgage.com