I’ve been wanting to have some Salem Oregon mortgage brokers do some guest posts for me because lending is so asinine these days, I thought it best if they could help explain the new and crazy process to you all. True to form, an underwriter is nit picking a transaction about the “paper trail.” The paper trail is such a big deal in real estate right now I asked one of the mortgage brokers that I know to write me a bit about the paper trail.
So without further ado…here is information about the dreaded “paper trail” by Carmen Babb.
As a lender, one of the most frequent lines I hear from customers is something like, “What more do you want from me?!” or “I never had to provide this for my last mortgage” and sometimes even “What are you going to ask for next: My blood type??” The truth is: home buyers get understandably frustrated because lending regulations require documentation on such a detailed level, it can be quite a process to satisfy an underwriter these days.
So…what’s the most common issue when it comes to documentation and home loans? MONEY! It seems simple to homebuyers: if you need $6,000 to close on your new purchase, then you come up with the money somehow, and it’s all good, right? Nope. Sorry, but it just isn’t that simple. Here is my best advice for home buyers:
• Meet with a mortgage consultant early on and determine how much money you will need
• Discuss where that money will be coming from with your mortgage consultant (be very specific – having money “in the bank” is different than withdrawing money from your 401(k) and depositing it into the bank)
• Work with your mortgage consultant to create a “paper trail” of ALL monies in your accounts. This means getting copies of all large deposits from your bank, documenting where the money came from, and documenting gift funds.
• Speaking of GIFT FUNDS – This deserves its own bullet point! When getting a gift from a relative or close friend, you must provide proof that the donor expects no repayment and had the money to give you, proof you deposited the money, and proof of your balance after depositing. The easiest way to do this is with a gift letter (provided by your mortgage consultant), a cancelled personal check from the donor, and a statement from your account showing the funds have been deposited. There’s also a little known secret: It’s even easier to get the gift BEFORE you officially apply for your home loan. Then, you only need a gift letter and a statement showing you have the money.
• If you have money in multiple accounts, leave it in multiple accounts for now. Your lender will have to document every deposit and every transfer, so the more you move your money, the more paperwork you’ll have to track down.
So does it sound daunting enough to stop you from wanting to buy a home? It shouldn’t! Documenting funds to close is not the nightmare some customers and lenders feel it is. The key is to be prepared to “prove it” and talk to your mortgage consultant before you move any money around.
The mortgage industry today is different than it was a few short years ago. There is no doubt about that! But if we step back and look at the changes, most are for the greater good. Added scrutiny from underwriters is helping to prevent another flood of foreclosures and it’s also helping to ensure that potential homebuyers really are ready to be homeowners. For years, people with no money, bad credit, and unstable employment history could buy a home with no money down. There weren’t enough questions being asked. Today…the questions are being asked.
As a buyer, try to remember this one bit of advice when applying for a mortgage: You’re asking for a loan of $100,000, $200,000, or more. That’s a lot of money, and your lender needs to document your file impeccably to avoid fines. If you work closely with your mortgage consultant, and work proactively to document funds to close, your home buying experience will go much more smoothly and you’ll save yourself the stress of trying to create a paper trail.
Carmen Babb is a mortgage consultant with Wells Fargo Home Mortgage
You can call her at 503-551-9690, email her at Carmen.Babb@wellsfargo.com or visit her online.