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How Do I Avoid a Documentation Nightmare?

By
Mortgage and Lending with Guaranteed Rate Mortgage NMLS #386349

Q: A client’s friend recently bought a home and told my client the mortgage process was a nightmare in terms of documentation. Specifically, she said that the loan officer kept asking her for documentation on deposits into her accounts. How do I avoid this with my client?

A: If you were to talk to anyone who closed a mortgage loan recently, this would likely be a common complaint. Over the past three years, underwriting guidelines have become more and more stringent in regards to documenting assets on both purchase and refinance transactions. When underwriters see a large deposit into an asset account, they will ask for documentation of where the deposit came from.

The bigger issue, though, is that there doesn’t seem to be a common definition among different banks and brokers as to what a ‘large deposit’ is at this point. Some define it as any deposit over $500, while others will look at the file with a little more objectivity when it comes to the beginning account balance and the ability of the individual borrower to make that deposit based on income and net worth.

My advice would be to talk to your client about what you and your underwriting staff are going to deem as a large deposit so it doesn’t become an issue prior to approval.

 

Comments (3)

Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

Chad this is a problem....I have started counseling my clients that this is going to happen so keep good records...if they sell an old car or piece of exercise equipment....make a receipt up!   keep copies of checks received...etc....it is driving my clients crazy though! 

Nov 23, 2011 01:17 PM
Yvonne Van Camp REALTOR
To Buy and Sell Real Estate, see me at Southwest Missouri Realty - Springfield, MO
"Home"work, I have the Answers!

There isn't a deal today that doesn't have this kind of situation arise.      But if we prepare clients then they say okay, I need to do this quick so we can get to closing.

Nov 23, 2011 01:17 PM
Marge Piwowarski
Phoenix AZ Horse Property - Phoenix, AZ
Phoenix AZ Horse Property, LLC

I have had the issue recently for amounts as small as $2,000.00  Dunno what that is about. 

Nov 23, 2011 01:25 PM