If you are in the process of buying a home, here are some things you need to know about your finances during/before the process:
- Cash Deposits: Do not make cash deposits into their accounts as these are extremely difficult to source. If they make cash deposits into their account they will most likely not be allowed to use this money for their transaction and it will prolong the underwriting process.
- Large Deposits: Please know that most large deposits other than their paycheck will need to be sourced (i.e. explained) (even transfers from one of your accounts to another account). Lenders will require copies of the checks that they deposited and a signed letter of explanation stating what the money was from.
- New Credit: If they open new credit between the time they apply for a home loan and their day of closing, they need to let their lender know about it right away. It may affect their pre-approval (i.e., buying the Best Buy electronics might disqualify or make it harder for them when buying their house). Their best bet is to not open any new credit accounts (or other loans) before they close on their home. So wait to make those large purchases for furniture and items to decorate your home until after your closing.
- Late Payments: Don’t have any late payments from the time they apply for the loan until their closing day. If they make a late payment and its reported by the creditor to the credit bureaus this could affect their pre-approval (i.e they may no longer get their home loan).
- Gifts: If they plan to receive a gift from a family member, let their lender know. They will require you to complete a gift letter (a form that we send to them) and will require additional documentation sourcing the gift funds.
- Employment: If they plan to quit their job or change their employment before closing, let the lender know as soon as possible. Again, this may impact their pre-approval for the loan (and should wait until after their closing if possible.)
- Business Losses: Lenders will verify their income with what was reported to the IRS for the past two years. Let the lender know about any business losses claimed on their tax returns as this may affect their qualification.
- Bank Statements & Retirement Statements: Send lenders ALL pages of any statements they’re requesting as part of the loan processing. For instance, if it says page 1 of 5, they need all 5 pages even if page 5 is blank.
- Tax Returns: If lenders ask the client to send them a copy of their tax returns please make sure that they are signed even if they need to sign them and date them with the current date.
- Use of Retirement Accounts: If they plan to use any money from a retirement account for their down payment they should plan to request the withdrawal of money as soon as they have a ratified contract as it can take time to receive their funds.
Thanks to Mike Wickham of Caliber Funding for this great information.