It’s not the house hunt that scares buyers off, it’s applying for a mortgage. It’s easy to mess up. Today is Mortgage Mistake #1 of a 5-part series.
Mess up #1 – Moving money from one account to another.
Many of you have heard that if you move your home-buying funds from one bank account to another it can cause problems with your loan. Has anyone ever told you why?
It seems like common sense that keeping your down payment and closing costs in a savings account or CD will at least give you interest until the very end of the mortgage process. Then when you're ready to close, you just take the funds out of those multiple accounts and put them in a single account. Then, all you need is one wire to get your closing funds to escrow. Makes sense, yes?
Wrong. Here’s why.
Lenders always track the funds for your down payment and closing costs.
They will examine the most current two months of bank statements.
Imagine that your funds are spread throughout several accounts. You decide to transfer them all into one account. You don't bother to show your lender the accounts where the money came from because the balances are now low, or perhaps you closed the account.
As soon as the lender sees the incoming funds from unknown accounts, they will ask for two months of statements from those accounts. Imagine if you transfer from several accounts?
Even worse if you leave it until the last minute. Just before you need to wire your funds to close, you reason, it will be easier to wire from a single account.
Good common sense, but the first thing you need to know about getting a mortgage; not everything will make sense.
The lender will require actual receipts showing the wires, the cashier’s checks or whatever means you use to move the money around. Sometimes those receipts aren’t quickly accessible. This can delay your close of escrow.
What is the Solution?
- Put the funds for your purchase into a single account one-to-two months prior to closing – or –
- Wire directly from however many accounts hold your funds. If they are in three accounts, wire from all three accounts.
Does this information help?