Mortgage underwriting after the credit crisis of 2008 and 2009 is like navigating a downtown Boston St. after a harsh New England winter, it's full of pot holes. These underwriting pot holes can deflate your hopes of an on time closing if you don't know have the vision to see what lies ahead. The most frustrating of these obstacles areincomplete bank statements and sourcing deposits in your checking and savings account. A required underwriting condition with most purchase loans, whether that's conventional or government, is to provide the last 2 months worth of bank statements.
When providing these statements, it's very important that these are full bank statements that include your
- FULL ACCOUNT NUMBER (no partial #s or Xs)
- ALL PAGES of the statement. (if it says 1 of 7, provide all 7)
It is also important that we evaluate the bank statements together prior to signing the purchase and sales agreement to make sure that the down payment money and any deposits can be "sourced".
What does it mean to "source" a deposit?
Essentially to source a deposit means to create a paper trail for that deposit. As a client/loan officer team, we have to be able to clearly document where that money came from. The banks need to make sure that these are legal sources of money as well as make sure that you have adaquet down payment funds. When an underwriter analyzes a complete bank statement they are going to pay special attention to the deposits into your account that are NOT direct deposit. This includes; transfers from other accounts, check deposits and cash deposits. If these are larger amounts, meaning over $400, or they total over $1,000 in one 30 day period we will need to "source" them. The list below will provide you with a guide of what is required for each of these 3 types of deposits.
Transfers: For a transfer we need to follow the trail of where it came from. This would include providing documentation of source of the tranfer. If it came from another account we would need a full statment from that account. Same would be true if it came from a brokerage account.
Check Deposits: For a check deposit, underwriting will require a copy of the check and a brief explanation as to what that check is for. They will then determine if that is an acceptable source.
Cash Deposits: For a cash deposit, underwriting will need a copy of the deposit slip and an explanation as to where the cash came from.
IMPORTANT TO REMEMBER - Most underwriting guidelines will not allow you to use cash deposits to count towards your down payment. For example: if you have $5,000 in your checking account and $2,000 of that money is from a cash or check deposit that cannot be traced back to employment income with a copy of a pay-stub, or rental income with a copy of a rent receipt, the underwriters can back that money out of their calculations. In other words, that $5,000 is now only $3,000 because that check or cash deposit cannot be "sourced".
Never make a large deposit or transfer into your account while your loan is in underwriting without first discussing it with your mortgage professional.
As you can see it is very important to be up front with your mortgage professional about what is included on bank statements. By taking the time to review the paperwork throughly at the beginning of hte process you will save time, aggrevation, and improve your chances of a successful on time closing.