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If I could only offer ONE tidbit of advice on how to make the process of getting a home loan easier, this would be it: Limit transferring money between bank accounts. Regardless of the type of home loan you’re getting, your lender is going to want to do something called “sourcing funds.” That means they will want to know where the money came from that you are using for your down payment and closing costs. There are a couple different reasons lenders do this.
1) They want to make sure the money you’re using for your mortgage comes from an acceptable source like a savings account or a loan from a retirement account. In other words, they want to make sure you didn’t take a cash advance on your credit card to pay for your closing costs.
2) The second reason they source funds is to make sure you’re not using your mortgage for nefarious purposes. i.e., You’re not using this home loan to launder the money you made selling guns to terrorists. Weird. But true.
In order to source these funds, the underwriter is going to ask for a bank statement or two. And they are going to go through these bank statements and look for large deposits that are not clearly your regular source of income. So they’re not direct deposits from the social security administration if you’re retired or your employer. If the underwriter sees a transfer from another bank account, she’s going to require bank statements from the originating bank account. And if she sees large deposits into that bank account, she’s going to require bank statements from the previous bank account. It doesn’t take many transfers from account to another before we all start going to a little cuckoo.
Want to make your life easier? Keep your money in one location. You don’t have to do it forever! You’re only going to provide your mortgage lender with the most recent two months of bank statements. If you think you’re going to buy a house in the next couple months just keep that cash parked in one place. Your loan officer will tell you the easiest way to get that money where it needs to be prior to closing.
My name is Emily Caryl Ingram. I lead a team of mortgage loan specialists at New American Funding in Port Townsend, WA.
