Financing in Colbert>Question Details

Nels77, Renter in Colbert, WA

Why would an underwriter deny our loan because the down payment was not our money ?? But our future earnest money???

Asked by Nels77, Colbert, WA Tue Apr 10, 2012

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Nels,
Down payment, closing costs and reserves need to be "sourced and seasoned." This means the bank loaning the money wants to know where it came from and you need to have had it in your possession for a while.
The reason they want this is to prevent unrecorded second mortgages or other loans that will affect your ability to pay for the house. If "Uncle Joe" was to loan you the money and expects $500 per month in repayment, you may pay him back if things get tight and not the bank, because you have to see him at Thanksgiving and Christmas.
"Future Earnest Money" is not a term we are familiar with. If you are selling a home, you only get the earnest money if the deal fails without cause. If it's down payment, are you providing financing? This would also have to be disclosed to the lender as you would be relying on the income from your buyer in order to make the payments. Chances are, without a history of receiving the payments this would not be considered.
Feel free to elaborate more so we can give you a better answer.
1 vote Thank Flag Link Tue Apr 10, 2012
3D party funds, not guaranteed
0 votes Thank Flag Link Tue Apr 10, 2012
There is no real answer to your question because there is not enough information here to understand what the question is exactly. As a loan originator, I, like Seattle MOrtgage, would suggest you talk to a lender directly about this. If you want to discuss this with me, I would be happy to do so. Just give me a call at 206-841-9976.
0 votes Thank Flag Link Tue Apr 10, 2012
Obviously your Loan Officer didn't properly explain the importance of sourcing all funds being used to purchase a home. We lenders are required to ask you " Who, What and Where with regards to not only your earnest money deposit, but all abnormal or odd deposits going into your bank accounts. I always tell every single borrower DO NOT MOVE ANY MONEY AROUND until you talk to me. And inevitably someone doesn't heed my warning. So what can be done? Plenty, your LO should have explained how to damage control and how to dodge the bullets, and if not you were simply in the wrongs hands.
0 votes Thank Flag Link Tue Apr 10, 2012
They the lender want to know you have skin in the game. No money in, too easy to walk away. They have been there before and are not doing that again for a long time. Past showed them they have to be harder on what they require.

Best to you all.

HLR
0 votes Thank Flag Link Tue Apr 10, 2012
Lenders want to know that the money is yours and not an additional loan that will need to be paid back reducing your ability to pay back your loan to them.
0 votes Thank Flag Link Tue Apr 10, 2012
Their fear is that the money was a loan to you which might compromise their loan position. All funds need to be documented to the satisfaction of your lender and their underwriters.
0 votes Thank Flag Link Tue Apr 10, 2012
Nels77,
What do you mean by "future earnest money"? In order to provide you with the best answer - we'll need more information. If your down payment is borrowed, you'll need to qualify with the payment for that loan.

If you're doing an FHA loan, your down payment can be gifted by a family member. What is your financing?

I'd love to hear more details - I hope you respond. I'm including a link to an article I wrote about funds for down payment and closing cost.
0 votes Thank Flag Link Tue Apr 10, 2012
A lot of lenders have different requirements and different types of loans also have different requirements.
0 votes Thank Flag Link Tue Apr 10, 2012
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