Avoid “Sourcing” and “Seasoned” funds stresses

If you’ve applied for a loan recently you’ve probably realized that the mortgage industry is not what it was a few years ago. Seven or eight years ago it was much easier to get a mortgage without much worry of documentation to prove where your funds for closing are coming from. In today’s market, you can expect the complete opposite. The guidelines Lenders are required to follow have become pretty tough. The amount of hoops you have to jump through has also dramatically increased.

If you are applying for a loan that will require you to bring cash to the closing table, here are a few tips to keep you sane throughout the process:

Tips Throughout the Loan Process

• Bank Accounts:

  Have all funds that will be used for closing in one account, preferably an account that does not have any irregular deposits.  Keep in mind any deposits that are clearly not a payroll deposit will more than likely have to be sourced.  So if you have funds that you deposit on a regular basis that is not from your regular source of income, try to have a separate account those can go in.

• Sourcing:

  Chances are if you do have irregular deposits, you will be required to source them.  If you are required to source a deposit you will need to provide a complete paper trail. This provides an explanation of where the funds came from. Check with your loan officer or processor on guidelines for any gift funds you may be using for closing. As there are additional documents that will be required from the donor.  Cash is never an acceptable source of funds. Because there is no real way to trace where those funds came from.  Try to avoid depositing cash to your account you will be using if at all possible.

• Seasoned Funds:

  You will be asked to provide your most recent bank statement when applying for a loan.  By the time you close your loan, that statement could be a month or two old.  That statement will still be acceptable to your lender as long as it is within 90 days.  If you’re thinking of buying a new home or refinancing and will need to bring money to the closing table,  it is best to do as little with your bank accounts as possible.  Avoid depositing any large amounts of money. Unless you are prepared to provide the additional paperwork to source where the funds came from.

Think ahead and try to plan out how much money you will need to complete the mortgage transaction. Also, keep in mind the additional sourcing documentation that may be needed if you have irregular deposits. Further, it will save you the headache and stress that can come from surprise requests for documents from your lender.