When applying for a mortgage loan it is important to understand why underwriters ask certain questions. One of the most popular questions is â€œwhy do you care where a get the money for my down payment and closing costâ€?
First understand that when supplying bank statements for a mortgage loan, only the past 60 days worth of statements are required. There are a few things an underwriter looks at when they are looking at your bank statements. The one in question are the deposits. Depending on the type of mortgage loan you are applying for (Conventional, FHA, etc.) will dictate how funds can be accumulated in an account per that loans guidelines.
With conventional loans the borrower has to provide proof that they have seasoned funds (funds in an account 60 days or longer) for the minimum down payment of 5% of the sales price. The statements must show proof the funds were saved by the borrower and not a result of a loan or gift. For FHA loans the 3.5% down payment can be a gift from a family member or close friend.
So, the first reason an underwriter ask for proof of a deposit is to determine that the down payment was accumulated correctly according to mortgage loanâ€™s guidelines. The second reason is to make sure the funds deposited in the account did not come from a new loan or credit card advance that was not reflected on the credit report. Therefore not having the correct monthly debt payments reported in the debt to income ratio, which in turn could affect that amount of loan a borrower can qualify for.
So, to answer the initial question. Underwriters have to prove that the funds accumulated in the bank account did not come from a source that is not allowed by the subject mortgage guidelines. The only way to prove that is show where the funds actually came from.
No need to get a lawyer. It won't help. Ultimately it is the lender's decision whether to lend you money or not and you need to play by their rules and jump through their hoops.
Best of luck!
Tony Grech | Mortgage Loan Originator | NMLS 977416
PMAC Lending Services, Inc.
Toll-free (855) 642-4762 | Fax (248) 945-4842 | Direct (248) 728-0078
Aside from actual discrimination cases, I have never heard of anyone successful winning a lawsuit for a lender not approving their loan. There is no law that says a lender must approve a loan that does not meet their minimum standards.
Your lender can give you the reasoning from the underwriter. If you were approved through an automated underwrite, and can meet the conditions required, there is still not guarantee that other things won't appear.
Your credit score is far from an automatic approval. It generally means a higher rate and closer scrutiny of your application and the paperwork you provide.
There is no way we can know what the reasoning is, but your loan officer should be able to five some reasoning. Once you get that ask what your next step would be. Is the loan amount too high, your income too low, your debts too high, did your employment or deposit verification come back not matching the application?
Ask your lender not just for the reason, but what you can do to get a loan for this house or another.