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Where is your money coming from to buy the home?

By
Real Estate Agent with JH Realty Partners 6501309180

Lets talk a bit about the down payment and/or cost of doing a loan. Where is that money coming from?

I hope you are reading this because buying a home is just a glimmer in your eye and you want to get your ducks in a row before buying a home.

Usually I tell people your 1st step is getting pre-approved by a lender - but really your first step is saving money for the Down Payment and closing cost, and seasoning that money.

What is seasoned money you ask?  It is money that has been in your account for more then 2 months.  But you say your parents are loaning you the down payment for the home, so won't this work?  Well a FHA loan will allow your parents to "gift" you the money, but............they need to sign a statement this is really a gift that you are not to pay back ( or it will be considered a loan and added to your debt ratio).  And some lenders will want to know where that money came from that your parents gave you.  So your parents may have to show where they got it from.

This is what we call a paper trail.  All monies have to be documented - money can not just fly out of the sky!  I still to this day have people that save their money in their mattress at home, and want to deposit it when they are ready to buy, not going to work in today's market.  

The lender is going to want to see 2 months of the most current bank statement, ( and they may ask again before closing) There better not be any big deposits you can not give a good paper trail to.  So if you normally deposit $1,000 every 2 weeks and all of a sudden there is a $5,000 deposit into your account, they are going to want to know who, what and where.

So empty the mattress and open an account at your local bank and season that money!

Then go get a pre-approval from a lender.............

 

 

 

Posted by

Michelle Gordon is a Realtor with JH Realty Partners - Ada, Michigan -  With a team of Realtors who's Focus is 1st time home buyers, Relocation, Luxury listings and Commercial Properties in West Michigan.  You may find Michelle on facebook, twitter or linked in and she invites you to join her.

Surprise Arizona Realtor Jim Braun Sun City Grand Active Adult Communities
Coldwell Banker Residential Brokerage Jim Braun Sun City Grand Az - Surprise, AZ
Surprise AZ real estate Phoenix West Valley

Michelle: Excellent point! Big deposits or withdrawals during the loan process can lead to some real headaches if you don't have the paper trail. The client says it is none of their business wgere that money come from.Wrong!

Oct 20, 2010 03:17 AM
Michelle Gordon
JH Realty Partners - Ada, MI
Finding Your Place

Jm, I did have one client tell me it was not the banks business, but I explained they are lending you a lot of money.  they can not do a smart business transaction with out knowing you can save money and pay debt.  They need to know the money you have to buy the home is not just a one time thing............that this is continued income.  The only one time big deposit I see get passed is tax returns, what a great way to spend your tax returns!

Oct 20, 2010 03:25 AM
Travis Behem
Jane Rowe Realty - Terre Haute, IN

Great point Michelle, we are always needing to educate our buyers/clients about the process, especially in this day and age, and sometimes you just have to make your point, professionally of course, lol.  But first time buyers especially dont always know a lot about buying a house, that's why it's good to have a Realtor I guess!

Oct 20, 2010 03:28 AM
Katrina Cole
The Jonathan Arnold Team of Inlanta Mortgage - East Grand Rapids, MI
Inlanta Mortgage, Business Development Manager

Thank you for this!  It is great to see an agent that supports what we as the lender have to explain.  There are so many times we have to explain to agents why down payment funds cannot be accepted. 

This is a major part of the transaction.

Oct 21, 2010 04:18 AM
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

Oh thank you for this.....CASH is NOT KING! Can you believe I had an offer and the buyer's agent said they were paying 50% cash. Great....let's see proof of funds. Oh, they don't have a bank account. Surprise....no account, no loan...even with 50% down.

Oct 21, 2010 04:22 AM
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

Thank you for this very good presentation for home buyer's.  I will suggest and reblog so more can see it.

Oct 21, 2010 04:39 AM
Lisa Ludlow Archer
Live Love Homes-Keller Williams, Charlotte, NC Ballantyne Area - Waxhaw, NC

I always have to tell my buyers, just do what the lender tells you regarding money, gift or otherwise and we won't have a problem. Have a great week.

Oct 21, 2010 04:54 AM
Michelle Gordon
JH Realty Partners - Ada, MI
Finding Your Place

Katrina - not sure how we can not support this and help prepare our buyers, as you can comply or not, but you can get a loan or NOT!

Travis - Yes, there is so much to learn and know, I wish all 1st home buyers worked with agents.

Karen - you are welcome! Who knew cash would be such a pain.  Do you know I have paid off my debt and my credit score dropped!  GRRRRRRR

Margaret - thank you!

Lisa - yes, follow the guide lines of the lender........they may not all work the same and have the same cost - but they ALL want seasoned cash to purchase a home.

 

Oct 21, 2010 05:22 AM