The information and illustration of the topic contained within this article is of such importance that I want to make sure all get a chance to read and understand it ... especially those presently involved or thinking of becoming involved in home buying or mortgage financing.
My thanks to Janet for writing about this timely issue. All professionals involved in a real estate closing should reiterate this information throughout the closing processing time. It's of that much importance ...
A weary home buyer showed up in the mortgage office last night, on the eve of her loan funding. She was confused, embarrassed, and bewildered.
She had signed docs the day before, and handed over a cashiers check. But the bank stubbornly refused to fund the loan. Why?
The borrower could not "paper trail" her cashier's check. In other words: the money had come from an account that had not appeared on her credit application.
"Paper trails" are documents that trace the movement of money from one account to the next. And for all of you rolling your eyes and saying "what difference does it make WHERE the money comes from?" I say this:
The money must come from an account that appears on the credit application you submitted. Advice to all mortgage applicants: If you are in the mortgage process do not:
- Switch banks.
- Close accounts.
- Move money from one account to another
- Fail to disclose accounts on your mortgage application
- Spend your cash to close because you can get the money from "somewhere else".
Sure, she had been told not to charge anything on her credit cards or to make any major purchase, but she should also have been told not to tamper with her asset accounts until AFTER the loan closed.
She had emptied her funds out of the big box bank and closed the account. Then she put them into a brand new credit union account.
But that's not all. To get her cash to close she had transferred the money into the new credit union account from a retirement account that WAS NOT DISCLOSED on her credit application.
Is the loan dead? Of course not. But it is delayed because it must go back through underwriting with the credit union and the retirement account disclosed. She will probably also need to show proof she liquidated the account on the original credit application.
Can you say DELAY???? (The word no one wants to hear when a loan is ready to fund).
The cash to close must LEAD BACK TO AN ACCOUNT THAT IS ON THE CREDIT APPLICATION. As a best practice, leave your cash to close in the same account throughout the loan process.
When you are ready to submit your funds to close, keep all withdrawal slips, deposit slips, wire instructions and make copies of checks.
And that is how to turn your PAPER TRAILS into HAPPY TRAILS.