In The News
Buying a new Home? . . .Warning!!!
August 27, 2011 by Joyce Albert · Leave a Comment
NO ‘mysterious’ deposits to your bank accounts –
Borrowing money for a down payment to buy a home is an absolute ‘no-no’ in the world of mortgage lending.
If there is a chance you may not have enough for the down payment plus closing costs, we can sometimes ask the seller to help cover closing costs. Oe you can even accept a gift from a close relative to help with the down payment. But borrowing for the down payment or closing cost money is totally forbidden!
I’ve had several buyers over the years who have run into problems, not because they didn’t have enough money, or because they borrowed money, but because they couldn’t prove their money wasn’t borrowed. And if a buyer can’t document the source of a deposit, the loan underewriters will almost always assume he made a private loan.
In one case, my client was a policeman. Like so many policemen, he had worked a ‘detail’. But when he deposited the check from the merchant, he didn’t think to make a copy of it. Wouldn’t you know, when they looked at his bank statement, the underwriters assumed he had made a loan, and he couldn’t prove otherwise. It became such an issue, that in order to close on his house, he had to get a ‘gift letter’ from his sister in the amount of the deposit. Isn’t that crazy??
Another buyer simply deposited cash from a garage sale. Since they were downsizing, they started cleaning out in preparation for their upcoming move. She emptied the attic of all the baby furniture (crib, stroller, and tons of baby stuff), along with furniture and they didn’t want to move to their new home. Seems natural enough – but how do you document the source of cash to a lender?
My third buyers used wedding gift money for their down payment. Again – how do you document the source of cash and a bunch of checks received as wedding gifts?
In all three cases, problems could have easily been avoided had my buyers planned ahead. All the policeman had to do was to make a photo copy of his check before depositing it. How’s that for proof?
In the second case, I would have simply advised my buyer not to deposit the cash. Had she simply elected to use her garage sale cash to buy gas and groceries over the next couple of weeks, all problems would have been avoided.
And for the just-married couple, the ideal solution would have been to give all the wedding gift cash to one ot their parents. Then the parent could have written one single check along with a gift-letter. Simple, legal, and so much easier than trying to prove the source of a dozen different gifts.
Remember the ‘Golden Rule’. He who has the Gold makes the Rules. In real estate, it will always be the lender who is funding the home purchase. So with just a little better understanding of the process, hopefully you can avoid a couple of the pitfalls.
Should you have other questions about the buying process, please feel free to contact me. If I can’t answer them, I have lenders I’ve worked with that I would feel comfortable referring you to. 
