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Keeping money in one place a key to getting a mortgage

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By Scott Sheldon January 30, 2015 12:00 am

Keeping your money in one place is vital to a mortgage transaction.

Cash to close and savings post closing escrow become critically important to sealing the deal. I’ll detail what you need to know if you’ve been moving money around and are applying for a mortgage.

It’s an issue for banks

Moving money around in different accounts may raise concerns for suspicious activity with home mortgage banks. Lenders these days must be able to document the paper of funds on each and every loan made. While 99.9 percent of mortgage borrowers are simply moving money from one bank account to another for various convenience reasons, they are at the same time creating a red flag when the origin of the funds cannot be substantiated.

When you move money around, the lender has to document each account the money passes through.

Picture yourself having a standard checking account that does not contain significant assets but is used for your monthly accounting of bills and expenses, and you took the money for your down payment to purchase a home from another account and moved this money into your checking account while continuing to pay bills.

It could appear to the mortgage lender, like you, are spending part of your down payment creating a cash to close roadblock. A better solution? Keep the money in the same place. Transfer the money when needed, sending directly to escrow on your loan transaction, simplifying the details.

Create a paper trail

To best avoid lending conditions surrounding money movement, be prepared to show the full statements of the monies leaving each account. It is customary within mortgage lending to provide two months of statements for each account needed for cash to close escrow and/or for savings required after the fact as a safety cushion. This paper trail must appear to the naked eye that the money begins in one account, goes to another and ends up at close of escrow.

As long as the paper trail is clear and conspicuous, the lender should have no concerns with these monies as long as the funds can be supported. The same goes for gift funds; gift monies will also need a clear paper trail. The same requirements that come into play maybe needed for that safety cushion incumbent of your loan program.

For example:

• Conventional loans: Two months mortgage payments needed in the bank in most cases financing a primary home, six months of mortgage payments for investment homes for all properties owned.

• FHA loans: No reserve requirement.

• VA loans: no reserve requirement.

• Jumbo loan: Varies by lender; generally at least six months mortgage payments in assets needed post closing escrow.

*If you plan to use a bank statement in conjunction for obtaining a mortgage that shows a history of money movement, including money transfers and other various accounts and/or additional monies being deposited independent of your income, you’re going to have some homework to do.

Other considerations include:

• Joint bank accounts: If you’ve been moving money out of an account with another party whose name is on the account but is not a party to the mortgage transaction, the lender is going to request a letter from this other individual stating you have 100 percent access to those funds.

• Cash deposits: Placing cash deposits in your bank account independent of your normal income, i.e., your normal job, can be problematic for getting a mortgage because these monies cannot be identified as to the origin of where they come from raising possible suspicious activity concerns even though they can be legitimate deposits-like freelancing or side jobs. Lenders want to see at least two months of mortgage statements without cash deposits and without large movements of money otherwise, expect these transfer and deposits to be identified, questioned and documented.

While these requirements can be somewhat of a nuisance making the prospect of getting a mortgage somewhat unpleasant, it is also a byproduct of the quality of loans being made in the market today, fully documenting improving everything leaving no stone unturned further substantiating a mortgage borrower’s ability to qualify.

As such, these credit requirements help ensure there is little risk to buying a home or taking on a mortgage you cannot afford.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at

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Keeping money in one place a key to getting a mortgage

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