My Mortgage Wish List -
Make it YOUR Wish List Too Before You Buy a Home
As a Grampa, I'm very aware of "Wish Lists". The topic is of grave concern to my 3 grandkids, especially at this time of the year ...
My little cuties, Henry, Marilyn, and Evie, aren't the only ones working on a Wish List. Their Grampa Gene is too. Only mine is aWish List for Borrowers ... those hoping to buy or refinance a home.
What do I ask for on that Wish List?
- The Gift of Knowledge
- Proactive Acts of Prevention
Pretty exciting, right?
Below are the issues I see arise most often ... and how my "Wish List" addresses each:
1. Problem: Acceptance of a cash gift or check to be used for Earnest Money, written by someone NOT named in the Contract or the Loan Application.
Knowledge Cure: If a Buyer and Mortgage Applicant, the check for Earnest Money should be written from your funds. Consider it an advance on YOUR Down Payment or the funds needed to Close.
Important Preventative Steps: Checks from Non-Borrowing, Non-Buying Parties cause problems! Don't use them.
2. Problem: Needlessly transferring money from one bank to another ... or from one account to another within the same bank.
Knowledge Cure: A common misconception held by Borrowers is that all funds needed to cover Down Payment and Closing Costs (known as Cash to Close) must be accumulated or deposited in one Account. That's NOT true.
Important Preventative Steps: Separate accounts, separate investments, separate banks can all be verified and documented. And their collective balances can be totaled to demonstrate enough Cash to Close. Rely on the process and Processor to accomplish this.
3. Problem: Working fewer hours during the period of the home search and contract negotiations ... or just before applying for a home loan. (Note: This is a problem of particular importance for hourly-paid employees)
Knowledge Cure: Mortgage Underwriters look unfavorably at low YTD (Year-to-Date) Gross Incomes reported on submitted recent paystubs (required for Loan Application).
Important Preventative Steps: It's important (when possible), to retain normal hours/pay during all phases of the home buying/application process.
Knowledge Cure: Cash has no acceptable means of being verified and counted as acceptable Funds to Close by a Mortgage Underwriter.
Important Preventative Steps: Do NOT deposit cash into the bank accounts utilized for Mortgage Application.
5. Problem: Changing jobs prior to or after Mortgage Application without consulting your loan officer.
Knowledge Cure: In terms of job history, length of employment, verification of income, this matters ... especially if the employment includes an actual change of employers.
Important Preventative Steps: Even if the change in employment is an improvement, make sure to talk to your LO prior to the changes being made.
6. Problem: "Magician Funds" ... funds initially reported in a bank account that disappears then reappear in a later deposit.
Knowledge Cure: Mortgage Underwriters need to know you have enough money to make your future mortgage payments, cover Closing Costs, etc. That means all funds need to be "seasoned" and verifiable, in your account, for a minimum of 60 days.
Important Preventative Steps: Plan ahead. Make sure all deposits are "seasoned" and in your account(s) well ahead of your Mortgage Application. If you receive a bonus, gift, etc. ... make it traceable and document it fully. (Mortgage Underwriters will require that you do so)
Make my Wish List YOUR Wish List too. Avoid problems during your critical Underwriting Process and at Closing time by proactively educating yourself regarding the needs and demands of Mortgage Approval.
Follow the tips above ... gather the Documentation you'll need for your financing proactively ... and your home buying and financing wishes will come true.
The process will be far less stressful, go much more quickly, and end successfully ...