Too many times, the down payment is getting questioned by the lenders. Just remember that the paper reduction act does not apply to the mortgage business. So if you want to avoid red flags that will send your deal to a nightmare world, make sure you look at these important steps:
1. All deposits need to be accounted for. Yes, all of them. I have heard a few stories of deals being held up for 75 dollar deposits that had no paper trail.
2. The accounts that the deposits came from will probably need to be verified. For example, if you closed a CD and put that money in checking (expecting to use it for your down payment) the CD will need to be verified to ensure that the money was seasoned.
3. Keep all receipts, deposit slips, and records of accounts when moving money. Keep a binder of your statements from January to December for each account. After the year is over, I scan them and save them digitally. Now if someone needs them for a loan, it is only a click away. It is important to mention that all pages are required. If the statement says page 1 of 4, make sure all 4 pages are there, regardless of if they are blank or not.
4. Anytime you have a check to be deposited (for down payments), save a copy of the front and back of the check. It will save a large amount of time if you have them on record.
5. Gift funds are getting tougher also. There have been cases when the gift funds were expected to be seasoned, and they were verified from the donors accounts. So if you get gift funds, make sure you save all deposit slips.
6. When it comes to a down payment, cash is NOT king. I have had several clients that saved cash in their safe at home and then wanted to use it for the down payment. Guess what? They couldn't. The money must be seasoned before it counts.
7. Printing your statement from the Internet won't work. Usually some critical information is missing, like a full account number or your name or something. Most banks will print out a statement for you, if you don't have your originals.
A couple of quick definitions:
Seasoned funds - In your bank account for at least 3 months.
Paper trail - A history of bank statements or copies of checks that show the origination of the funds. Basically, you are proving they are your dollars and not borrowed.
Hopefully, this helps you avoid some delays in your loan. By being aware of what lenders are requiring, you can eliminate the red flags, and your transaction will go smoothly.
- Good luck.