I sometimes hear frustration from buyers who are being asked to produce the papertrail that supports the source of money used for downpayment and closing costs. The underwriter (the person that issues final approval for your loan) requires this information as one method of eliminating the possiblity of fraud, to meet the requirements of investors with whom they work, and for quality control. They're just doing their job, but sometimes meeting this requirement is difficult and tedious.
You may have been diligently consolidating money from various accounts so that it's easier to manage, but this can actually cause more loan approval challenges.
During the time you're working on purchasing a home, or at least for the prior three months or so, don't move money around unnecessarily. The underwriter will require documentation of any large deposits or withdrawals from your account. This could include money you received as gifts, from transferring funds between accounts, investment liquidations, cashing out mutual funds, retirement funds, or whatever. You may be asked for copies of cancelled checks, deposit receipts, or other supporting documents that may see inconsequential.
If you're relying on gift monies that will be used in your purchase in any fashion, you'll likely also be required to produce a letter from the person giving you the money that documents the fact that you are not required to repay the gift. In fact, the person from whom you're receiving the money may also need to produce copies of bank statements, etc., that documents where they received your gift money.
In fact, this is also not the best time to be changing banks, or even opening new accounts.
Don't move your money around ... or if you do, be absolutely certain you can document everything thoroughly.
Your Dedicated Realtor & Active Rain Blogger, working the Auburn, Kent, Renton, Maple Valley, Federal Way, Covington, Puyallup, Sumner, Bonney Lake, Lake Tapps, and north/northeast Tacoma areas.
Gabrielle, Excellent article. I couldn't have said it better. There are so many little things buyers do without realizing the headache later for all involved in the purchase process. Keep putting this type of information out there for everyone's sake.
Good, solid advice Gabrielle. And I might add that if you are going to buy new furniture for your new house, do it after closing.
Good advice I had to deal with this when buying my own house.
We have a letter we send out to all applicants right after closing that is entitled "Avoid the Pitfalls" warning borrowers what things might affect their loan approval. This is one of them - but you definately went into more detail. Good post!
Guy: Thanks! This is one of those times when the Buyer is so well-intentioned, and then it just makes things so difficult at the end.
Wayne: Yeah, no kidding! Or how about that $2,000 fridge on credit just before the underwriter decides to pull your credit report one more time.
Heather: I hear this from almost everyone! It's just one of those steps that has to be done.
Ruth: Excellent! Sometimes as Realtors we forget to remind our clients of some of these important details, but I figure the more times they hear it, perhaps the more likely they'll remember.
Gabrielle, this STAY PUT advice with finances during the transition to buying a home is right on the money!!
Tahnks, Gay, for the post. I couldn't have said it any better myself!
I can also say that one should not buy a new car at the same time one buys a new house.