Mortgage and Portfolio Loan Guide

4 Things to Stop Doing as Soon as You’re Pre-Approved

Isn’t it fun getting a mortgage pre-approval?

You get your credit pulled by the nice guy in a tie at the bank. You tell him about all the glorious money you have to put down on your home. You drink coffee and explain how you make a clean salary, and you hardly ever use your credit cards…

Of course he is happy to print off your crisp, clean pre-approval letter. He connects you with the local real estate genius, and the house hunting begins.

All of the sudden your dog gets sick and you have to pay $900 to keep it alive. “Well sorry ole’ Sparky but I can’t dip into the family savings, let’s use the AMEX to keep the ticker ticking.”

A week later you finally sell your BMX racing bike on craigslist and you’re feeling good with a nice $1,500 deposit into the rainy day fund.

Jimmy from high school gives you a ring and asks you to be a partner in his new business venture, and you accept the offer. C’mon, YOLO.

There was a sweet deal going on at Buy Here, Pay Here, and you finally got the Bronco 4×4 you’ve always wanted.

Uh oh, why is my mortgage guy asking for a paper trail for this stuff? Any why has my credit score tanked? This new business is gonna kill it. What, do they want a blood sample too?

  • Don’t use your credit cards past 30% of you available balance. It’ll change your scores in a way you and your lender won’t like. Sometimes (depending on how long it takes to find a house) your credit may need to be pulled again.
  • No large deposits in your bank account that can’t be easily sourced. (anything other than salary income). Large deposits raise red flags and need to be sourced. What the lender wants to know: “where did it come from?”  “do you have mysterious liabilities we don’t know about that you’re paying back?”
  • Don’t change jobs. Can that wait while you make one of the biggest investments of your life? Consistent income helps strengthen the likelihood of your file being approved.
  • Stop buying stuff. When your lender pulls your credit they are taking into account all of your liabilities, and taking into account what your income is in order to calculate what you’re approved for. If your liabilities increase, there is a chance your pre-approval will decrease. Make sure to ask how tight your ratios are.

Remember, the lender is on your side (believe it or not). We WANT to earn your business. But if you decide to change your financial circumstances after you get pre-approved for a mortgage, just understand that there is going to be some leg work involved to put the pieces of the puzzle together.


E005: 4 Things to STOP After Pre Approval


Tip of the day: When you get pre-approved, provide all your stuff up-front. Tax returns, W-2s, pay stubs, bank statements. This will minimize room for error or misunderstanding.

portfolio mortgage lendersNeed a mortgage pre-approval?

I invite you to reach out to me.

Get the pre-approval you’re looking for from me. You won’t be talking with some newbie. You’ll be talking directly with me, Adam Lesner. If it turns out I can’t help, I’ll usually be able to point you in the right direction at the very least.

pre approved home loan

What “crazy” item did your lender ask you for that seemed absolutely ridiculous?

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Finally! Mortgage Loans for Bad Credit

mortgage loans for bad credit 1

Yup, you’re approved!

Applying for mortgage loans when having bad credit can be uncomfortable to say the least. I can’t tell you how many times I’ve heard the same story. A great family, with strong stability fell on hard times. They had to let their house go because of a serious injury, downsizing of a company, or loss of a loved one. In many cases those folks get back on their feet within 6 months to a year, and would like to buy a home again. However, with the lending guidelines in today’s world, that can be quite a challenge.

The good news is there are lenders out there that will treat you like a human being. Mortgage loans for bad credit do exist, and I’ll tell you how to find them WITHOUT having to jump through a million hoops.

How bad can your credit be?

Well, it depends…

Credit scores and time since the blemish really aren’t the main factors. The main factor is “why”. What’s the story behind the credit problem? Were you blatantly irresponsible? Or did you have a rough patch?

Let’s say you had a foreclosure a year ago because your company outsourced your job after they cut your pay 50% a year before they let you go. You were in a position that you genuinely couldn’t afford to make your payment and had no choice but to foreclose. As long as you can some how prove the course of those events taking place, and show a previous history of being financially responsible, you definitely have a chance to get approved.

Now, if you “gave your house back to the bank” because you noticed home values were declining, that’s another story. It has to make sense. There needs to be proof that there was a legitimate reason for the cause of the credit issue.

Who can offer bad credit loans?

The vast majority of lenders, especially big banks, and mega-originators, only write “A-paper”. They are (for the most part) extremely conservative with what they will approve, and who they will approve. You want to look for a small to mid-size local company. Maybe a credit union or a company who has some sort of partnership with a credit union. Small local banks are good too.

Why? These types of companies are typically privately held. They are more likely to be committed to building and strengthening relationships in the community, and bend over backwards to meet the needs of their clients. I’m not suggesting that there aren’t awesome people that work at BIG companies. All I am saying is that their hands are tied many times because of the company they represent.

There is something special about reaching out to someone and telling them you can help when no one else would even give them a second look because of their bad credit. Really giving folks a second chance without making them wait 2-7 years to get back on their feet.

What can you expect with these in-house loans?

  • Primary residence only.
  • Usually 10% down will be required. Gift okay.
  • The interest rates may be higher than typical loans.
  • No monthly mortgage insurance even if you put less than 20% down.
  • Paying points may be required.
  • Okay on purchase or refinance. Even cash-out is okay in some cases!

Getting a loan like this isn’t for everyone. Typically it’s a short term fix for people with unique situations, but know that home-ownership is right for them. Once they’re back on their feet within a couple years, it would most likely make sense to refinance into the loan that meets the needs of their updated circumstances. Did you know this type of opportunity was available right now?

portfolio mortgage lendersI invite you to reach out to me.

Get your questions answered.

You won’t be talking to some newbie or intern, you’ll be talking with Adam Lesner directly. We don’t get everyone approved, but we do our best to find the right loan if it makes sense.

pre approved home loan

Check out video below:

Adam Lesner NMLS 198818 | Mackinac Savings Bank NMLS 401686 | Main offices in Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Ohio, Oregon, Tennessee, Virginia, Wisconsin.  

 


Repair your credit today with Lexington Law


Zero Down Mortgage – USDA Home Loans

RD loan

Zero Down Mortgage

Did you know that even if you’re not a veteran you can buy a home with a zero down mortgage in many areas? And it’s not too good to be true. There are, however, some restrictions regarding location and income.

The United States Department of Agriculture (USDA) Rural Development guaranteed loan usdalogoprogram is a government loan designed to help low-moderate income earners purchase a home in “rural” areas. However, you may be surprised to see what the government considers to be rural and low-moderate income.

Income

The income restrictions will vary across the country and even across each state. Here is an example for my local market in Livingston County, Michigan. For a guaranteed RD loan the annual household income must be at $93,450 or below. Even if the spouse is not a borrower on the loan, their income will be used as a factor in the household income. USDA looks at the whole picture, not just the applicant. You can use this tool to help you get an idea if your family qualifies for an RD loan in regards to income. Remember when using that tool, you’re looking for qualifying on the guaranteed loan, which will maximize your buying power from in income standpoint.

Location

Many folks are shocked when they take a look to see that their neighborhood is in an area that is considered to be a “rural area” which allows them to get a zero down mortgage. Just outside the metro Detroit area and not far from many major cities Rural Development financing is available. Although the mapping tool on the USDA website is not 100% accurate, you can use this tool to give you an idea of what areas are eligible. You may be pleasantly surprised to find that you don’t have be living “out in the sticks” to be eligible for Rural Development financing.

What is also exciting about RD loans is that you can buy a condo with this program as long as it’s within the eligible geographic limits. Crazy right? Some people call RD loans “farm loans” and you can buy a condo with them. How awesome is that?!

What to Expect

  • Make sure you have your ducks in a row in respect to credit. You don’t need to have perfect credit, but it needs to be reasonable.
  • The process may take a little bit longer than other loans because it needs to get final approval by USDA after the lender approves it. However, right now in my particular market in Michigan, the RD turn time is 2-3 days. So not a significant delay currently.
  • Mortgage insurance is significantly less than FHA on a monthly basis, about 1/3 of what it costs on FHA.

There are so many expenses to consider when buying a home. So if you have an opportunity to buy with a zero down mortgage, and you qualify, why not take advantage of that opportunity?

Watch Video:

The Most Important Part of the Mortgage Process

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 The Most Important Part of the Mortgage Process

By: Ted Lyons

There can be no denying that the mortgage process has become significantly more complicated in the last several years.   The real estate/mortgage bubbles and subsequent collapses made clear that the envelope had been pushed too far when it came to mortgage products that were available.  The industry joke in mid-2000’s was “You only need a Social Security Number and a pulse to get a mortgage – and there’s even some flexibility when it comes to the pulse.”  As the ruins of the bubble era mortgage marketplace were surveyed a flurry of government regulations ensued.  All well-meaning, some flawed in their execution, but each of them needing to be taken into account as we walk through the actual work of obtaining a mortgage.

As a result of all of these changes and the alphabet soup of regulatory agencies and regulations that resulted (CFBP, MDIA, HVCC, QM, etc) the most important part of the process has become not who can make the most outlandish rate pitch – but rather which originator and which company can guide you through the experience intact.  The sad truth of the matter is that for all of the regulatory changes there still isn’t much to stop a large boiler room of a large mortgage bank or lender from promising one rate, and then at the end of the process delivering another.  Their advertisements are littered with enough fine print to choke a horse and the process can be so overwhelming that at the end of it, one doesn’t even necessarily remember what was promised at the beginning of it.  This doesn’t mean that an individual shouldn’t examine the market and make sure that the interest rate, terms, and costs of a given originator and company aren’t in line with that market.  But many of the most severe self-inflicted wounds while getting a mortgage can be from chasing that Holy Grail of a one-eighth lower interest rate or going with a company that says they will give you $50.00 off your costs because you have an account with them.

The demands can be tough in the mortgage world these days.  My customers oftentimes vocalize that the process has become mind numbingly intrusive – and I can’t argue with them there.  So my job is to be their Sherpa, guiding them through unavoidable challenges at all times. I am also their Gladiator, fighting for them so that they can buy or refinance their home when the going gets tough.  That’s why the most important part of the mortgage process today is having a champion originator who works for an organization that can be trusted.  If you’ve had a great experience with an originator in the past – stick with them.  Seek out the advice of colleagues, friends, and family who have had GOOD mortgage experiences.  Finally, look your originator in the eye and determine for yourself if they look like they have the intelligence and the guts to help you get your mortgage – even if the process turns out to be challenging.  Because it’s possible that it will.

Ted Lyons, NAMB, MMLA
NMLS/Michigan License # 140426
Michigan First Mortgage  NMLS# 130329
Branch Manager
Direct (734) 807-1017   Fax (734) 786-2230


How to Get Pre-Approved with Ease

The 4 Pieces of the Mortgage Puzzle

Buying a home is easy. Well…if you take a minute to skim through this it might be a little easier for you on the qualifying end of things. Getting a mortgage is a matter of helping the lender put together the pieces of your financial puzzle. Many times it can get what feels like overly complicated in this world of increased government regulation and lending guidelines. But it can be a lot less complicated if you do a little preparation and have realistic expectations.

So what are the pieces of the mortgage puzzle? Credit, income, assets, and property. If one piece doesn’t fit, your puzzle isn’t complete and you probably won’t get approved. Let’s take a look at those items one piece at a time.

Credit 

Your credit scores and credit history are looked at thoroughly. Each score will be verified from the three credit bureaus (experian, transunion, and equifax). If you only have 2 scores that show up that’s okay, but your lower score of the two will be used to qualify. If you have 3 scores, ideally you want to have a middle score in the mid to high 700 range. Anything below 680 can make things more complicated than what you may be looking for. The other factor that your credit report helps with is determining your monthly debt in comparison to your monthly income (debt to income ratio).

Again, the goal is to keep things simple.

When considering the history shown on your report it’s best to have 3-4 established tradelines that you have been paying on for 24 or more months. A tradeline is any obligation you’re required to pay on a monthly basis that is reported to the credit bureaus. Things like credits cards, student loans (that are not deferred), car loans, personal bank loans, and simple mortgage approvalmortgages would be simple tradelines to verify and use. Cell phone bills or car insurance payments are an example of debts that are not typically on a credit report, and generally would not be used as traditional credit. For derogatory credit tips and more credit preparation see my credit page.

Income

Having a 2 year consecutive and verifiable income stream will help keep things simple for you. You want to have 2 year’s tax returns, W-2’s, and 30 day’s worth of recent pay stubs from your current employer. These items are asked for so that you have the opportunity to show stability and consistency in your income.

If you’re on a base salary or hourly (full time) that will definitely help minimize bumps in the road. Keep in mind that if you receive overtime, bonus, or commission pay it needs to be verifiable to show history and consistency. If you changed employers in the same line of work within the last 24 months, be prepared to provide proof of that employment. If you’re self employed or receive other types of income be prepared to show a consistent history (24 months) and likelihood to continue. For more in depth income tips see my income page.

Assets

There are many options when considering how much you should be putting down to buy your home. Everyone’s situation is unique. You’ll need funds for down payment, property taxes, homeowners insurance, and closing costs. Having at least 2 full months bank statements (all pages) would be something to expect to provide. If you have retirement funds or other liquid assets in a brokerage account that you’ll be using then you’ll need to provide a most recent quarterly statement, and recent activity statement on that account to show proof of funds available. You’ll need to show proof that you have transferred those funds to your bank account prior to closing.

Be prepared to provide a paper trail for everything. If there are any deposits in your accounts that you don’t have a legitimate paper trail for then you will find yourself in a difficult position as far as approval is concerned. Selling your favorite baseball card collection for cash to someone you met on craigslist might be tough to prove. For gift, grant, and other asset info see my assets page.

Property 

The home you are purchasing is the collateral that is being used to secure the financing. Your lender will get an appraisal done to get an opinion of what the fair market value is in relation to the agreed upon purchase price that you and the seller came to terms with. If the appraised value comes in high, congratulations! You technically have instant equity, but the lender will still use the purchase price as the value for qualifying purposes. If the appraisal comes in low you and the seller will need to renegotiate price or you’ll need to bring the difference to the table. The lender will also ask for any repairs noted by the appraiser to be fixed and re-inspected prior to closing. In most cases you’d insist that the current owner completes those howell mi real estaterepairs because you don’t own the home yet.
The lender doesn’t require a general inspection to be completed but it’s usually recommended. This would be a licensed inspector you would hire to tell you what you’re getting yourself into regarding condition. They will put together a detailed report including foundation issues, ventilation problems, and other things that the appraiser wouldn’t necessarily notate. For information on property types and helpful links see my property page.

 

Simple enough right? Look, even if you’re not a first time home buyer, it can be a bit overwhelming. The market and the guidelines are constantly changing. You will save yourself a lot of heartache and pain if you take the time to get your ducks in a row several months before you intend to buy.

A few tips to end with…

Your willingness to provide all items asked for by your lender in a timely manner is helpful to minimize the length of time it takes to close on the home.

Use a Realtor when buying or selling a home. He/she will save you time and money.

Remember that all the pieces to the puzzle have to fit. Even if you make $100k/year, buying a $50k home, and have no debt. You still need to have acceptable credit to obtain financing.

Watch Video:

The Mortgage Collateral

The Property Piece of the Mortgage Puzzle

It’ game time. You have the steady job. Your down payment is sitting safely in your bank account. Your credit expert helped you get things cleaned up. You’re now ready to buy a home! It’s time to put together the last piece of the mortgage puzzle, the property. This is where the fun begins. The factors to consider when figuring out what home fits you the best are endless. This should help you gain an understanding, and a snapshot on how the process works when you find the home of your dreams.
 
Collateral
 
The home you are purchasing is the collateral being used to secure the financing you’re getting. If you expect a lender to give the green light to finance a home for you, be prepared for them to perform due diligence as well. Your lender will have certain standards that the property needs to meet. 
 
Inspection
 
Once your Realtor has helped you negotiate an amazing price, it’s time to order the inspection. Although lenders mortgage collateraldon’t typically require a general inspection to be completed by a licensed inspector, it’s highly recommended that you get one yourself. Your Realtor usually will have a couple recommendations of credible inspectors in your area. An inspection can cost anywhere from $300 to $800 depending on the scope of work and the property size. Your inspector will examine each component of the house in order to give an opinion on what meets code (electrical, HVAC), what doesn’t meet code, and what the estimated remaining life of items might be (water heater, roof, furnace). The cost that you pay for an inspection pales in comparison to the value you receive by knowing exactly what you’re “getting yourself into” with a potential home purchase.

Appraisal

Your lender will require an appraisal to be completed, and will submit an order through a third party. There is no need to order your own appraisal because privately ordered appraisals cannot be used or considered by a lender. The cost can vary depending on scope of work and property size. Typically $400-$750. The purpose of an appraisal is to get an opinion of fair market value of a home, and to find out if there are any serious issues with the home (peeling paint, broken windows, mold…). The appraiser will physically go out to the property to do an general inspection, take pictures, and take measurements. The appraiser will pull records of recent sale history for similar properties that have sold within the area of the home you’re buying. He/she will take into consideration the square footage, amenities, condition, age, and other important factors that contribute to value. The appraiser will make specific adjustments to value based on how those factors compare to the actual property being sold. By doing that, the appraiser can make an educated decision of what people are willing to pay for a home that is similar to the one you’re buying. This is called the sales comparison approach. This approach gives the best indication of what the fair market value is because it’s based on what people are actually willing to pay in that given market. If any repairs needed are noted by the appraiser, there is a strong likelihood that those repairs will need to be completed. You don’t necessarily want to make any repairs, nor will you be authorized in most cases, because you don’t own the home yet. What if you spend $100, and a Saturday afternoon installing a rail on a porch, just to find out you can’t close on the home for other reasons? Doesn’t make much sense.

Property Type

  • Single family home – This is your typical stick built, built from the ground up, free standing home. You’ll be required to maintain your own landscaping, snow shoveling, and exterior maintenance. You may or may not have an organized homeowners association (HOA) in your neighborhood. The HOA will help with general street maintenance and neighborhood needs. Be mindful of what the HOA fees are because it can have an impact on your debt-to-income ratio. In some areas you may think you’re buying a single family home, but find out too late that it’s a “site-condominium”. Depending on your loan program, your lender may have to do a more extensive review of the property and HOA if the home is found to be a site-condo.
  • Condominium – This can be a home in a community of 1 or 2 story homes that are attached, or a building of many stories containing units stacked on top of one another (like an apartment building). You own the interiorcollateral mortgage of the home. The exterior is typically maintained by the HOA, so the HOA fees are typically more costly on a condo. There are usually amenities like a pool and exercise facility among other things. Condos are popular for people who want to enjoy the benefits of homeownership, but pass on the headache of maintaining anything outside the home. Condos require a more thorough review than any property type. The lender will examine the financials of the HOA in detail. They’ll look for things like reserves, delinquent owners in the community, and insurance coverage. If you are getting an FHA loan or a VA loan, you can find out what condos are already approved in your area. For FHA approved condos in your area click hereFor VA approved condos in your area click here
  • Townhome – A townhome can be a very similar setup as the condo that’s in a community with 1 or 2 story homes that are attached. With a townhome you do own the land outside but the HOA will cover day to day maintenance usually. Your lender will contact the HOA, but typically will not be as strict on guidelines as they would be on condos.
  • Manufactured home – These are homes that are built in a factory and placed on a piece of property. It can be a challenge to find a lender for manufactured home financing. One of the reasons many lenders do not offer financing on manufactured homes is because manufactured homes typically depreciate in value. In other words, the value of the home will likely decrease over time. Whereas the value in a single family home, condo, or townhome, will typically increase (appreciate). Of course the housing meltdown in recent years has made many people question that fact. But historically, real estate is a great investment, and will appreciate in value.  
  • Multi-unit – any property that is being sold as piece that has several functional dwellings (units). These are duplex (2 unit home), triplex (3 unit home), and fourplex or quadplex (4 unit home). You can obtain a residential mortgage on multi-unit homes as long as they are 4 or less units. Anything with 5 or greater units will require a commercial loan. Multi-unit homes are a great way to supplement your income and have your mortgage paid for by the tenants.

Escrow Account

  • General – Your escrow account is a cushion set aside so that you have adequate funds available to pay your taxes and insurance when they are due. At closing you’ll pay for your full year of homeowners insurance, and several month’s worth of your taxes (depending on the time of year and frequency of taxes due). In your mortgage payments moving forward you’ll pay a fraction of your annual homeowners insurance and taxes. Each payment will contribute to your escrow account so that enough is accumulated when the next tax or insurance bill is due. Your lender will manage your escrow account for you. This keeps things simple for you because you do not have to worry about having to pay a large bill for taxes and insurance two or more times per year. It’s all included in your payment so you have less responsibility to manage. If you have a FHA loan, VA loan, or put less than 10% down, you’ll be required to have an escrow account with your lender.
  • Insurance – You’ll need to obtain an insurance policy to cover unexpected, significant damage on the home. Each property type will have different requirements, and needs that will be covered. Your Realtor and your lender can give you insight on what type of coverage to get. Certainly the insurance agent you choose will be the expert in that field on what coverage you need.
  • Real Estate (property) Taxes – Be mindful of how much the taxes on your property are. This can make a significant difference on your budget and your debt-to-income ratio. Your taxes are likely to fluctuate, which can cause an adjustment in your monthly escrow payment.

Congratulations! 

With the information you’ve been able to acquire by skimming through the “keeping your home loan process simple” series, you’re now more prepared than the vast majority of home buyers. Use this as a reference. Use it as a tool to come back to as you get closer to being ready to take the next step into the American dream. Subscribe by email to stay in the loop on the latest and greatest info on homeownership, and balanced living.  

A few closing tips…

From Livingston County, Michigan expert, and licensed inspector, Dominic Vagnetti of Inspections on Demand. 517-540-0800

 

-Roof conditions and foundations are the two most worrisome items for buyers. Roofs are a disposable product and we want to start paying extra attention as they reach their 20th birthday. We are seeing longer lifespans from dimensional (or architectural) designs, however exceptions are always present. Curling, granule loss, missing shingles are things a buyer can see driving up to the property.

-Foundation cracks can be problematic but are most commonly superficial. Look for signs of water leakage that would require injection sealant, gaps larger than 1/4 inch, or horizontal cracks which can be signs of significant movement.

-Foundation waterproofing and drainage are mostly typical of 1970s and newer homes. Prior to that, sump crocks and foundation drain lines were either not present or poorly designed. Signs of water damage or flooding can be found by examining homeowner belongings on the floor or looking for stains on wood walls or shelving. It can be important to differentiate between ongoing flood issues and a single water event like a water heater failure or leak in a pipe.

 

  

Do you have to prove your savings to buy a home?

The Asset Piece of the Mortgage Puzzle

There you are, Mr. Hotshot at the blackjack table. You sat down with a hundred bucks, now you’re up two grand. You’re feeling good, top of the world really, and decide maybe it’s time to call it a night. You cash in your chips with a smile on your assets gamblingface thinking how proud your wife is going to be for the first time in years. Things have been a bit rocky since back in ’06 when you bought her that vacuum for Christmas. But not this time. Today you’re a winner. With these winnings in hand, you finally have enough money saved to move out of mom and dad’s basement and buy a house! Monday morning comes around, and you’re devastated. Your buddy at Easy Peazy Funding has to break it to you that the $2,000 deposit that you made into your bank account needs to be sourced if you want a mortgage. There needs to be a paper trail proving where that cash came from. You’re confused because there is no way to prove you made that money from using mind power, and pure skill. When the denial letter comes in the mail your wife kindly throws your clothes into the front yard. She leaves a note saying something about California, and heading west. The rest is history.

Depressing right? Let’s try to make sure you’re doing all the right things to prepare for buying a home. In this portion of the “keeping your home loan process simple” series, the asset piece of the mortgage puzzle is given to you in a gift basket.

When you’re purchasing a home, get all of your financials in one place so they are easily accessible. You’ll need funds for down payment, escrow account (for taxes and insurance), closing costs, and general reserves. Along with all of your pay information, you’ll need bank statements, retirement statements, brokerage account statements, and proof of any other account you’re using to qualify.

Bank statement

  •  Be ready to provide 2 months consecutive bank statements, including all pages. If it says page 2 of 6 anywhere on the assets for mortgagepage, provide all 6 pages.
  • Make sure that your statement shows your name, address, bank name/logo, account number, balances, and activity on the account. If any of those items are missing you’ll need to provide more information. Many times an online print-off will show your account number, but not your name.
  • Non-sufficient fund (NSF) fees will be evaluated. If you show a habit of having NSFs, your lender may decide that pattern is an indication that you’re not ready to buy a home.
  • If the statement you provide is a shared account (someone other than you is also on the account), the individual you share the account with will need to provide a letter confirming you have full access to the funds.
  • Large deposits need to be sourced. If there are any deposits on your bank statement other than your normal income; you will need to provide a paper trail proving where those funds came from. All jokes aside, you may actually be able to use gambling winnings if the casino provided a slip or coupon confirming the amount won. If you sold a vehicle or jewelry you’ll need a bill of sale. Don’t accept cash from the buyer, ask for a check. Additionally, you’ll need to provide a 3rd party opinion (kelley blue book for example) of value in order to confirm the sale price was not unreasonably higher than fair market value. This is to prevent fraud. So Johnny can’t sell his ford escort to his “neighbor” for $10,000. There might be something fishy going on there in the eyes of your lender.

Retirement and Brokerage Accounts

  • If you’re liquidating retirement funds you should be able to print off a most recent quarterly statement. If you are taking out a loan against your 401k your lender will factor that liability into your debt-to-income ratio. In some cases you may have an additional tax penalty if you withdraw retirement funds prior the being 59 1/2.
  • Above and beyond a recent statement, you’ll need to provide proof the funds needed for closing have been liquidated. You’ll also need to show where those same funds were deposited into. It’s wise to deposit those funds into the same bank account that you’ve already provided statements for. The goal is to keep it simple, so putting those funds into a different account could open a new can of worms.

Gift Funds

It’s acceptable to receive gift funds to help with down payment. Each loan program has it’s own guidelines pertaining to gift funds, but here are a few general points to keep in mind:gift from family
  • The person “gifting” the funds needs to be a family member, or someone with an obvious close personal relationship (like a fiance).
  • You both will need to sign a letter confirming the amount and purpose of the gift funds. The letter will also need to confirm there is no expectation of repayment to the donor (the person gifting the funds). They will also need to show their ability to gift the funds by providing 2 months bank statements.

  Grants

Some states and communities offer grants to assist homebuyers with down payment. As long as the entity providing the grant is credible, the lender should accept the grant as an asset because typically a grant does not require repayment. Some grants require a homebuyer course to be completed by the borrower prior to being eligible for the grant. This is to ensure the individual is aware of the pros and cons of homeownership.
There are many unexpected expenses when buying a home. Cash is king, have your assets in place. Aside from lender requirements there are so many things to consider. Carpet, fence, paint, new locks, blinds, and so much more. If you feel like every penny is being scrutinized by your lender, you’re probably right, and it’s truly for your protection. If you feel like things are getting a bit too tight, it might be best to reconsider your price range.


A couple closing tips… 

Bank statements are valid for 60 days. If you’re house hunting for 5 months, send your lender new bank statements as they become available.

Do not overextend yourself. There will always be something that comes up that never crossed your mind. Leave yourself a cushion for those expenses so you can sleep at night.

make sense mortgage