The loan closing process is very important and there are a number of aspects that have to fall into place. It is crucial that you provide all the proper asset documentation as well as information about the source of the funds. If you use the incorrect checking account for your down payment, there is a possibility of your loan being denied, even if all the final documents have been signed; and this can be a truly frustrating situation to be in.
Seasoning of your down payment money is almost as important as its source. This is exactly why underwriters need a minimum of 2 months of bank or asset statements right at the start of the approval process. These are some of the acceptable sources of a down payment:
Bank Accounts- either savings or checking
Investment Accounts- mutual funds or money market
Retirement Funds- It’s important for you to keep in mind that when you borrow against a 401K plan, a repayment will be required. This will be calculated based on the Debt-to-Income Ratio
Gifts – It is possible for family members to gift the down payment funds (certain restrictions apply)
Trust/ Inheritance Funds
Life Insurance- Cash value & face amount
Government Grants- A number of state, county & city agencies offer certain special down-payment assistance programs
Things to Remember
As a borrower, it is important for you to make sure that your loan officer has been provided complete information about the down payment. This information should go to him very early in the process. This ensures all the required questions, documentation & explanations are reviewed or approved by the underwriter. A good rule to keep in mind that all the funds you are using for the down payment should be pre-approved by the underwriter right at the start of the approval process.
Very simply, if you forget to deposit the required money in your checking-account while you are heading to the closing appointment, it will not be acceptable to get any cashier’s check from a friend, for this purpose. Always make sure that your cash-to-close has come from the proper source. It will save you a lot of trouble and frustration during the closing process. Contact ResMac Home Loans for all mortgage-related information.