If it's for a refinance, you most likely won't have to show too much for assets unless you are coming to closing with funds. Hope this help's
FYI- They are not looking to see how many times you go to McDonadls every week :)
If all the money you need to buy a house appears in the two months prior to closing as one big lump sum deposit, then they will have to trace where it came from.
Generally you can't borrow funds to buy a house. Some of it can be gift, but they have to approve that gift and sometimes do and sometimes don't, and there is paperwork to verify it is a gift and not a loan. Who the gift came from is also important, so sometimes they want their bank statements too.
They will examine these more closely for some people than others, and may be "looking for" different things as to your statements than someone else's. The "they" is the underwriter. If it is a quick approval of an over-qualified buyer, she may simply verify the cash to close. If the underwriter is having a hard time saying yes, then she may pick over those bank statements with a fine tooth comb.
Also, I realize that it seems like your loan officer has the best deal around but a quote is just a quote until your transaction goes live. Then and only then do you get a binding good faith estimate and that's what really matters. I know for a fact that there are a couple of loan officers that have replied here from washington are smart as whips (some of the smartest in this forum) and you may consider giving them a shot at your business. They might surprise you.
(I sure hope this isn't a particular national lender that advertises a 4.25 30 year fixed on their webiste, . . . Yikes!)
There are multiple reasons, but I'll give you the biggest reasons an underwriter wants to see your bank statements:
1.) To make sure the down payment is coming from an "allowable" source. For instance, if it's a gifted down payment, that may be allowed but SOURCING the gift from an allowable donor is required. One example, you may not be able to receive gifts from non-family donors.
2.) To make sure you didn't open any new loan for a down payment. Many loan guidelines actually will allow you to take a loan for a down payment (in fact, most of the Down Payment Assistance programs offered throught he Washington Housing Finance Commission IS a small loan for a down payment- Reference http://www.wshfc.org). However, if you do take a loan for a down payment, the terms, balance and payment of your loan must be calculated in your debt ratio.
3.) To see if the money is coming from an account that is shared jointly with someone else. If it is shared jointly, you must get written consent that the funds from that account can be used for a down payment from the other account holder.
4.) (this is the major point Ardell mentioned) making sure you have enough funds to close. It costs time, energy and money to get all the way to closing and NOT having enough money to close. It seems uncommon and is definitely uncommon from seasoned loan officers, but it does happen from time to time and probably more often than we'd all like to believe.
There are many other reasons, but those are the biggest ones. I tried to cover these topics in a blog post about making sure your earnest deposit can be sourced.
The same reasons apply.
Remember that mortgages (at least nowadays) are more balance sheet lending than credit driven lending. You can get a mortgage with pretty average to below average scores if you have money down, good work history and the purchase makes sense compared to your expenses (including your new mortgage). Are they looking for large deposits and overdrafts? Yes, they probably are. However, they're looking for ANYTHING they feel should be clarified. That said, the 4 reasons above are often the biggest reasons an underwriter wants to see your statements.
FYI, if you're already having problems reaching your loan officer, you should consider switching. Being this is your first home purchase, you'll never really understand how important it is to have somebody who's available. They don't have to be local, they just have to be there when you need them in some capacity. Especially to answer questions like this. There are SO many other questions you may NOT ask because you feel they're too busy for you. You can keep asking in this community, which is helpful, but you want a professional and an expert working for you too, not just guiding you through from online answers on a forum. I know for a FACT that there are multiple people on this thread who would do a better job. I'd be happy to remove my name from the hat as an available loan officer to help you just to express how important this is (and how much faith I have in some people in this community). Your first home buying experience is so heavily effected by the quality of loan officer and lending institution. For every first time buyer who has a great experience, there's often another (if not two) other buyers who had a horrible experience. If you want to see for yourself, start a new thread called, "Real Estate Agents, how many transactions did you have fail due to financing in the last year?". Trust me, it won't be a pretty thread.
@Ardell and Rhonda, It's good to see familiar faces here! Looking forward to seeing you two at the next barcamp.
Thank you again to those who provided your helpful insight! I think we have a better insight now!
I've heard a few folks use the term seasoned. Does this mean you should have had the funds for a while? If I take the monies (for down payment and/or closing) from a retirement plan right before I need the money, does this look bad? Why am I submitting bank statements when the money's not even in there yet.
As for the overdraft piece, my account doesnt sit overdrawn and thus, is not at a neg balance at the end of the month. Its just matter of writing every last item down ALL the time right away :) But I am always able to bring back to a positive right away.
If the loan you are attempting is requiring a down payment and/or reserves, those funds must be verified and "seasoned" in the bank for a minimum of one month. They want to make sure that you didn't borrow the funds from somebody and/or that they are from an "acceptable" source.
Check out Keane's answer too, very detailed and right on the money. Hope all this helps!
I've provided a link to an article I've written about this on my mortgage blog. Good luck!
In my experieince, over 20 years, lender's have always asked for a certain number of months of bank statements. It is part of FNMA guidelines for loan underwriting and it is also part of what portfolio lenders require. It helps the lender verify your cash flow and your ability to pay the loan. We all spend our money differently.
Since you mention W-2's you must be an employee, so you will be required less paperwork than a person who is self employed.
Good luck, and know that you will want to get pre-approved with a lender as soon as you become active in your search. Most of us Realtors can recommend great, experienced mortgage banker / brokers which is the very best way to go because it expands your options. I also recommend Mortgage Planners.
Here are a couple of deadlines for you to consider: the deadline for the First time homebuyer tax credit is coming up and the Federal government is stopping their investment in mortgage back bonds, so that indicates rates will be going up after the end of March.
The very best time to purchase, since affordability has been tracked is now, and that may be nearing it's end. The incentives to boost the housing market are stopping in June.
On my website, http://www.karenmcknight.com at the button called About the Area / Service Providers, I recommend some great lenders.
Good luck with your plans. It is definitely an opportune time to buy.
I think we're all saying to talk to the lender because at some point, we've all had the last minute problem that we've had to scramble to fix :)
Good luck going forward, it sounds like you're in a great position!
I do hope it all turns out well for you...and everyone else involved in the real estate transaction.
You have set off several alarm bells in my head. First, you need to ask questions in a fairly anonymous way here and second that you feel your lender is such a good deal, but is not reachable and has not informed you regarding your funds, seasoning, gift funds and letter.
Your purchase and sale are riding on your loan, not to forget your earnest money. Gift funds must be sourced, are often limited as to how much of the down payment can be a gift, and require a gift letter signed by the giver.
Your portion of the down payment must be in your account 60-90 days in most cases. Since we have no idea who your loan is going too, it's impossible for anyone here to answer with any authority, and frankly as I have previously written, these are matters you are paying your lender to address with you.
Many a purchase and sale fail due to lender and loan issues. By lender, I mean anyone involved with handling your documentation from your loan officer, their processor, the underwriter, the lender themselves. A good deal is one that gets funded at a competitive rate. A great rate that never funds is no bargain.
If your lender will not come to the table and answer all your questions and concerns, confirm you are on track to get your loan funded, consider another lender, and do it quickly if you have a purchase and sale in process.
Maybe you can email her vs trying to call her, or maybe she has an assistant or processor who can help you. But if you are in escrow, you really need to have the real facts from your specific lender as they really do have their own "rules" about these things.
Here's my next question then. If they are looking to verify funds, how long should I have had the funds for closing and down payment in the account? If part of it is gift funds and part of it is income but only in the account the day I made the offer on the property (so a little over a month before the date of closing), is this long enough?
As to "overdrafts", if you have money in other accounts, then your account may be "overdrawn" but not "you". If you have $50,000 in savings and overdraw your checking...no one cares. If you continuously overdraw your checking, have zero savings, and you cover your overdraft with your next paycheck (living paycheck to paycheck) that will not be good.
You may want to consider an automatic transfer system with your bank to avoid overdrafts. You said "But I am always able to bring back to a positive right away." Where do you get the money to do that? Do you borrow it? Do you have to wait for your next paycheck? Or do you simply transfer it from another one of your accounts where there are more than sufficient balances on hand?
Where that money comes from to cover the overdraft, will make a difference to an underwriter.
Having your funds sourced and seasoned means you are able to to show your funds for a certain length of time. The typical seasoning is 60 days. If you have funds from a retirement account and going to transfering them to another account, you can do that at anytime, but you will have to show a "paper trail". Here is how you would show that:
-provide retirement account showing the funds withdran and transfered
-provide bank statement recieving the funds from the retirement account
You simply just need to connect the dots for the lender. They need to know where is the money coming from and where is it going ?
If you have the funds in an existing retirement account, they will be seasoned. Seasoned means having the funds in an account you control for at least 3 months. If you were receiving gift funds, or another loan for the down payment, this would have to be disclosed.
These are good questions to be asking your lender. I hope they are available to you and responsive to your issues. While we are all happy to answer your questions on a site like this, we have limited information about your whole circumstance that your lender does have. Insuring you understand this process and can get detailed specific answers to your questions is that lenders job. Don't be bashful in asking all you need to know, in reality the loan is as big of a decision as the house purchase itself and carries long-term significant consequences you should fully understand. As a lender myself, I get paid in part to make certain my clients are fully informed of the process and answer all their questions.
This should all happen in the background, your broker should be working with the underwriter to clear these conditions.
As others have said, you are verifying your ability to provided the down payment and manage your funds. An occasional overdraft may not be an issue, but a pattern could be. In light of the past 3 years of Mortgage Banks meltdowns, these documents are absolutely necessary. This is why getting Pre-Approved early in the process is critical. If you get this step out of the way before you fall in love with a house, you have an opportunity to make some changes and if necessary do some credit repair work.
In addition to your bank statements, make certain you include and retirement, 401k, IRA statements as well. Even though these funds are not readily available without penalty, banks consider them as additional assets in your favor.
Good luck with the rest of the transaction, hope all goes well!
A friend of mine had 2 times the income I do. That friend had a little money in a retirement account and was very tight in his spending ability. He had enough bills that had to be paid every month that he was barely squeaking by.
My income was half of his. My expenses were much lower than his. He had a car payment, I bought $1,000 or less vehicles and fixed them as needed. I never had a monthly payment. I did not eat out, he did. I carefully looked at every penny I spent. I saved a relatively large amount of my income. He did not.
My net asset value is many times my (twice as well paid) friends.
Income alone does not mean you can, will, or have saved any money at all. Income only means you have x coming in. If you spend x+1 you are in trouble. If you spend x-1 you will have savings available.
The lender wants to see your bank statements to make sure you have saved money, they require a down payment and it is a waste of their time and money if they assume you have it and then at closing discover you are actually broke with $23.26 in your pocket and need to get gas on the way home.
1) the amount of ready liquid cash you have in the bank (in checking and savings)
2) your typical monthly income & expenditures which allows for a more accurate glimpse of your debt to income ratio
Hope that helps