Okay this one is important. Probably the most important information you can have before buying a home. This is the biggest source of frustration for most buyers. Where you get your cash for the loan matters.
“As long as I have the money, what does it matter where I got it?”
We get this question all the time. And it makes sense. If you need $10,000 at close and you have $10,000 at close what is the issue?
The reason this can be an issue is because Fannie, Freddie, FHA, and VA all have rules about eligible sources of funds and ineligible sources of funds.
What are eligible sources of funds?
The money you have in your bank account is an eligible source of funds. The money you have in your retirement accounts can be eligible if we provide the terms of withdraw and we paper trail the money coming out of the retirement account to your bank account. Loans against property can be used for funds as long as the new payment works with your debt ratios. Gifts from an immediate relative or someone with a financial interest in the house (a fiance or partner who will be living in the house) are also eligible.
What are ineligible sources of funds?
You cannot take unsecured debt out for any part of the cash needed at close. Unsecured loans, credit card cash advances, and loans from family are all ineligible. If funds cannot be sourced (IE cash) they will be ineligible.
“Seems pretty straight forward…What is the frustration?”
The issue with assets is usually not the source but the documenting of the funds. If you have a “large deposit” on your bank statements (More than 50% of your gross monthly income) we will need to document and explain it. When we cannot document it (IE cash) we cannot use it. If you are getting a gift from a relative we will have to paper trail that as well. This can include getting a bank statement from the donor, which can be an issue for some donors. If you are moving money from a retirement account to your bank account, it is important to start this as soon as possible so we are not delayed waiting for it to get into your account.
If you are moving the money into your bank account from another source (gift, secured loan, retirement account) it is important to start this before or immediately after you get a purchase contract. Contact us prior to moving any funds so we can direct you on exactly how to do it.
When you are informed about the process and we are informed about your assets, it will ensure a smooth home purchase.
Petrovich Team Home Loan is your Omaha Lender. We here to help with all of your home financing needs in Omaha and the surrounding area.
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