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.
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