How to make getting a mortgage EASIER with this one tip!
So, what is very often the most difficult part of the mortgage process? Is it figuring out if you have enough income? No, unless you are self employed the calculations to figure out your income are relatively simple: hourly wages, salary, overtime, and bonuses divided by a specific time period. Is it debt? Well, 45% of buyers between the ages of 22-40 did state that student debt did delay their home purchasing process. However, while debt can slow the process down it is easily definable and you know what to expect and can easily be advised by a mortgage profession on what to pay down to give you the best results. Maybe it’s credit scores? Although of the 4% that were denied mortgages about 24% of those denials were due to low credit scores and again, your mortgage professional should be able to guide you through what to do to raise your scores within a relatively short time period. Give up? It’s one word. Assets!
In my 27-year career in the mortgage industry nothing has been less anticipated, understood and has been more frustrating by the homebuying public than the required documentation of their assets. By the guidelines of Fannie Mae, Freddie Mac & FHA (who essentially underwrite and purchase almost 60% of all mortgages) homebuyers are required to provide at least 60 days of asset statements showing where the funds for the down payment and closing costs are coming from. The problem begins with the fact that most people have more than one account and very often they transfer funds between those accounts as needed. If any of those deposits are deemed to be “large deposits” then they must be sourced. So, imagine you write the initial deposit check from your checking account and you transferred that deposit from a savings account. Now you need 60 days from that savings account but suppose 30 days prior to that transfer you liquidated some stock or took money from your 401K or Roth IRA then 60 days of those statements will be needed as well. Any large deposits into those accounts during that time period will also need to be sourced and if any of them come from a cash deposit then you will have issues. You can easily see how quickly this can get very complicated and paperwork intensive.
Now add on to that the fact that many buyers under the age of 40 do the majority of their banking over their mobile devices and that underwriting requirements call for the account # (or at least the last 4 digits of that account, name, running balance and a URL be present on any account statements. Not exactly a recipe for smooth sailing with less paperwork (BTW help with paperwork was the 4th on the list of things a buyer most wanted help with).
Some of the requirements for a mortgage are getting better. Guidelines now define “large deposits” as deposits that amount to 50% or more of the applicants monthly gross income. So, in most cases, deposits under the 50% limit do not have to be sourced. Some lenders are developing the ability to automatically assess a buyer’s bank account and statement via a simple link (although, not all buyers are comfortable with this yet).
So, what is the one simple thing that homebuyers can do to avoid this paperwork and frustration? Most buyers know they are going to buy a few months before they actually go under agreement on a home, simply estimating the amount of funds that will be need (again, a consultation with your local mortgage professional will help establish this) and transfer those into 1 account (start a new checking account) and only use that account for the down payment and purchase of the new home. I guarantee the financing portion of your new home purchase will go much smoother.
Kevin Berju, Branch Manager – American Financial Network 215-681-3587 www.PhillyMortgageTeam.com