Last month I posted “how banking habits can affect your loan approval” (March 19th). I honestly can’t stress this enough! This would be the number one “speed bump” that my clients and I deal with. I know and understand that this can be frustrating and may seem very invasive to your privacy when you have to disclose financial documents such as bank statements and having to source any large deposits.
When you are asked to provide documentation for large deposits please know that we are NOT looking at what you spend at the grocery store or your spending habits, what we ARE looking for are large, un-sourced deposits or even undisclosed debt payments (ex. new loan not showing on credit report yet). Lending laws require to show proof that you are NOT receiving or borrowing money from any of the interested parties (i.e. Realtors, Lender, Visa, etc.).
I would have to say that about 90% of us have more than one bank account (personal, joint, retirement, etc). With those accounts you probably transfer funds from one account to another. IF this happens and your lender does NOT have a copy of ALLyour bank accounts, be expected to provide statements from the bank account in which you are transferring funds from into the bank statement you DID provide to your lender originally.
WHY?….
Because again, underwriters need to see where money is coming from making sure you are not receiving money from another loan, or from any of the interested parties (as stated above).
Now, to add a little more to the mix, IF you are self employed and the “other” bank account you are transferring funds from is a business account, this is can be another “speed bump”. IF this is your situation, BE PREPARED to provide a letter of explanation from your CPA and/or bookkeeper stating that the use of your business funds WILL NOT affect your ability to stay in business. This is not optional this is a requirement!
My best suggestion for you with all of this information is that when you are ready to purchase a home, make sure all your funds that are needed for your home purchase are in ONE account at least two months prior to getting “pre-approved” with your lender. Most importantly AVOID CASH DEPOSITS once you have been “pre-approved”! (refer to letter attached below for more information)
In order to help you with this, I have attached a letter for you to print and/or save as a reference when needed, also so you can pass it on to those that you know are in the process of purchasing a home or wanting to purchase a home.
I hope you find it helpful, and as always, if you ever have any questions please contact me, I am always here to help!
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~Cheers
Ray Williams
Branch Manager
Summit Mortgage Corporation
