Making Sure Your Cash-To-Close Comes From The Proper Source

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.

Acceptable Sources

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.

 

Common Documents Required For A Mortgage Pre-Approval

Today, a number of lenders are quoting 10-minute mortgage pre-qualifications online or over the phone. But only a mortgage approval that has been issued by an underwriter holds weightage, as the person has the opportunity to thoroughly review all the required documents.

The lending guidelines are constantly changing, the government is pulling in the reins on regulations and there is a lot of volatility in mortgage rates. With all these factors in view, most real estate agents require first-time home buyers to have a pre-qualification letter, before they actually show them any new homes.

How a Pre-Approval Helps You

The pre-approval letters helps you in 3 ways:

  • You will know the mortgage amount you qualify for

  • You get a general estimate of what total housing payment will be

  • When you submit a pre-approval letter along with your purchase offer, the seller is more confident that you will be able to meet your end of that agreement

The Documentation

In order to get the pre-approval letter, you are required to fill out a loan application form and submit a few documents, which will be reviewed by the underwriter and/or the loan officer. The common documents that you will have to submit are:

Income / Assets for Wage Earner:

  • Last 2 years W2s & Tax Returns

  • 2 most-recent Pay Stubs

  • 2 most-recent Bank Statements, Liquid Assets, 401(K), Investment Accounts

Income / Assets for the Self-Employed:

  • Last 2 years Tax Returns – Business & Personal

  • Last Quarter’s P and L Statement

Letter of Explanation For:

  • Employment Gap/New Line of Work

  • Late Payments / Bankruptcy on Credit Report /Judgments

Other:

  • Bankruptcy Discharge

  • Any Child Support Documentation

  • Mortgage Payment Coupons (If you own other Real Estate)

  • Lease Agreements (If you own any other Rental Properties)

Be Well-Prepared

The Q&A sessions can sometimes end up being more than just a qualification process and you should have all the right questions & answers ready. In any case, once you have identified a trustworthy loan officer who can meet your expectations, you will need to have all these documents ready. The loan approval process can be very complex and being well-prepared, helps in taking away some of the strain. For more information about the kind of documents you require, contact ResMac Home Loans today.