Defining "my" money

Since this has come up five times in the past two weeks, it’s time to review the source of funds for a home purchase. Even for loans not requiring a down payment, the buyer is at least writing a check for the earnest money deposit to show the seller they are serious when making an offer to buy the house. Where the money comes from is really important.

Current loan documentation requires submitting all pages of the last two monthly bank statements. These are reviewed to show there is enough money in the account to close the transaction. (We’re also looking to see if you’re bouncing checks or riding your overdraft line of credit.) But by far the most important piece is “where” each of the deposits came from. Payroll or retirement received via direct deposit is a very clear indication the funds are yours. Any other deposits can trigger a question.

Why the big deal? Lenders want buyers to have some “skin in the game”. The idea is that if you put your own money into acquiring the house, you are less likely to walk away from it later.

What counts as “your” money? Payroll deposits, income tax refunds, insurance or court settlements, or any money that has been in your account for at least two full statement cycles. Again, if we see an unidentified deposit on the last two bank statements, we’ll need to see where it came from.

What doesn’t count as “your” money? Credit card cash advances or other loans, Uniform Gift to Minor accounts held by someone else for your benefit, transfers from a family member’s account, using your Power of Attorney to access an account without your name on it, or cash that’s been held outside of the banking system.

When you feel ready to start shopping for your next home, do yourself a favor and talk with a qualified mortgage advisor first. No kidding, each of the “not” scenarios above came across my desk in the last two weeks, and those people are now waiting for funds to “season” in their bank account for two months before they can buy a home. Don’t let that happen to you.

Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-7325 with your questions about purchase, refinance, and reverse mortgage.