Things Mortgage Lenders Need to Know About Borrower’s Money
Your client may not realize this but when they decide to buy a home, they will be required to do a lot more explaining and documentation than they think. To ease along the mortgage lending process, it is best to prepare buyers about possible questions that the lenders will ask about the money in their bank accounts before they make the down payment.
Here are some things that the lenders will want to know about the borrower’s money
If the Bank Balance is Seasoned
If the borrower has a balance in his bank account that remains unchanged for a period of at least 60 days, it is called seasoning. When the borrower maintains such a balance in the account, the lender is confident that they will be able to foot the closing costs. This is quickest way to gain approval for the loan.
Reasonable Explanation for Big Deposits
It is possible that the borrower received a huge bonus from work was paid back an old debt he wasn’t expecting. These one-time deposits do not go unnoticed and will pique the interest of lenders. The borrower should be able to reasonably explain these large financial gains. To avoid stressful loan process situation, the borrower should be advised to open a separate account where they can keep a large chunk of money and keep the balance consistent for least 60-90 days.
Retirement Savings Account
If the borrower has funds saved in their retirement account, then the lender accounts only $0.60 per dollar to assess the qualification. It is important to think from the lender’s perspective to make correct assessment of the borrower’s finances. If at any point, they have to use these funds to pay the bills, the borrower’s funds would be subjected to withdrawal penalties. Accounting for potential market fluctuations, mortgage lenders agree that 40% reduction is a realistic value to assess the borrower for mortgage approval.
Borrowing Against 401(k)
Borrowers often consider taking loans against 401(k) to pay for their down payment and cover closing costs. However, they may not know this but the payment made towards that loan will be treated as a reduction in income since it is paid from the borrower’s paycheck. This reduces the borrower’s qualifying income, affecting their chances of loan approval. A mortgage professional should first assess the 401(k) reserve situation before they take out loan against it.
Complete Bank Statement
Gone are the days when incomplete bank statements were enough for lenders. These days the borrowers are required to give a complete statement, including the legal disclosures. Every single page needs to be attached along with the application. If the borrower does not want to use an asset for qualifying purposes, the mortgage professional can simply remove it from the application.
Since every lender has their own guidelines and mortgage can be a complex procedure, the best way to get around the hyper-regulated financing is to work with a specialist. Outsource mortgage services to Expert Mortgage Assistance and use our skilled professional for you. They have a team of trained experts who work 24/7 to meet all your mortgage requirements and help accelerate the loan process.