By J Mansisidor
As we continue to discuss the important considerations for purchasing a home, this article focuses on the MOVEMENT of money. Moving large quantities of money between accounts and sizable deposits will raise red flags and often require thorough documentation. This includes moving large sums from a savings investment or retirement account into whatever account you plan to use for your mortgage transaction. It can be gift money you receive from a family member. It can also come from a sale (for example, the sale of a motorcycle) that will result in a larger-than-normal deposit into your account.
It is common practice for lenders to request two months of bank statements. These account statements will show where monies for down payment, closing costs and reserves will come from. The statements are also used to identify any abnormal deposits. Funds in your account prior to the review period are considered seasoned and don’t require further explanation or documentation. If there are gift funds that will be reflected within the account statements provided, these will need to be accompanied by a gift letter (most lenders will provide) and a paper trail to show the source of the funds. Moving money from one account to another also requires a paper trail showing the originating account. Any sale of an item (individual property) resulting in a large deposit will require the bill of sale, and some lenders even require some type of advertisement. It is best to move any monies needed, if possible, three months before to avoid the need to provide additional supporting documentation.
Last but certainly not least, setting your CLOSE date. Most lenders, especially during the purchase season (May-July), require 30 days from receipt of the purchase contract to close, and some may require 45 days. It is wise to discuss any specific timeline considerations with your lender early on, especially if you are looking to close sooner than 30 days. The mortgage underwriting process typically takes 30-60 days. During this time, the lender assesses the risk associated with your loan. Setting a realistic close date around major events will make your transaction less stressful. Knowing what to expect through the process and being adequately prepared with your documentation will help facilitate a smooth closing experience. Open lines of communication with your lender upfront can avoid unnecessary challenges.
J. Mansisidor is a Specialty Loan Officer and Medical Loan Specialist with Truist Bank.