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Beware of the rules of Lending, 5 of 12 Overdrafting
May 17, 2012 by Elise Groves · Leave a Comment
DON’T OVERDRAFT — I’m not talking about drafting Ryan Tannehill with the 8th overall pick either. Let’s talk about nasty little subject that we call BTDs or Bank Transmitted Diseases. As much as we don’t want to admit, we have all gotten lazy, had 1 too many drinks at the bar… BAM! The next morning you check your account and there is a fresh overdraft… Before you know it, you have shamed yourself into transferring money from your savings or other banks to cover it up… a real downward spiral, but I digress.
Mel Kiper Jr. Hates Overdrafting!!
During the loan process is NOT the time to miscalculate how much money you have in your account and use your overdraft protection (OP). The underwriter does NOT look kindly on people who can’t balance their checking account. You’re trying to convince the lender that you are a low credit risk and worthy of borrowing hundreds of thousands of dollars and paying it back on time.
Imagine how the underwriter would view your ability to manage your money if that $5 footlong from Subway showed up under OVERDRAFT PROTECTION. Worse yet, your checking account statement shows you have a history of using your OP in months past, and might even give a dollar amount that you have racked up in those fees. That alone could deny you the loan, please practice safe banking and protect yourself.
Beware of the rules of Lending, 4 of 12 Shredding
May 14, 2012 by Elise Groves · Leave a Comment
DON’T SHRED YOUR PAY-STUBS & BANK STATEMENTS— I run into clients all the time who get their bank statements and pay-stubs in the mail, then they verify the information and balance their own accounts, and promptly shred the statements. There is absolutely nothing wrong with this… unless you are in the process of getting a mortgage!
Please hang on to them during the entire loan process. The underwriter is going to want at least one actual bank statement and 30 days worth of pay stubs, so keep them on hand.
But wait, I can hear it now,”Elise I don’t get paper statements or pay-stubs in the mail ever since I opted for E-Statements” well good for you… I hope you know how to print and scan or email those to us, and if you don’t you better learn fast.
Kidding aside, we all work in an electronically dominated world now a days and it is very important to be able to protect ourselves from identity theft. The Groves Team takes any and all sensitive material seriously and have all non-record keeping papers shredded after the completion of your deal.
Beware of the rules of Lending, 3 of 12 New Credit
May 10, 2012 by Elise Groves · Leave a Comment
DON’T APPLY FOR ANY NEW CREDIT—Resist that new set of knives or the 15% discount you will get if you open a new account!! The lender will refresh your credit report right before they fund the loan and Lord help you if new credit inquiries show up on that report! 
You are going to have to jump through hoop after hoop to convince the lender you didn’t just take on a whole new monthly debt that will disqualify you. Even if you are well qualified the lender will want to know why you are trying to aquire new credit durring perhaps the largest financial process of your life.
Just wait…. It’s the credit inquiry that could kill your deal, so stay out of Best Buy, Home Depot and the car dealers’ showroom please… IT’s A TRAP!!!
Beware of the rules of Lending, 2 of 12 Moving Money
May 8, 2012 by Elise Groves · Leave a Comment
DON’T TRANSFER MONEY FROM ACCOUNT TO ACCOUNT— Please put your money for your down payment and closing costs in ONE account and leave it there, and the sooner the better please. DO NOT keep transferring back and forth between checking and savings, this is especially true if it is two separate banks.
The lender is going to make you verify every single deposit, transfer, wire, etc. over a two month or longer period, so just be prepared to fully document every little financial detail going in and out of those accounts. The lender really is going to turn over every rock and make sure you don’t have money just ‘show up’ that can’t be properly accounted for and ‘papertrailed’… and no, we can not use the old “we had a garage sale” deposit excuse any more.
If you are going to be getting a Gift from family or cashing out various investments to help build your asset account for this transaction, please consult with us before you even think about it!
both of these scenarios are very common, completely within the rules of lending and totally botched all the time because of poor Lender to Client education. Help me help you… we don’t want to chew up valuable time half way through the loan process.
Heed my warning on this, please. You can do transfers, but they better be backed up with the correct paperwork, including DNA and blood samples, or else. (No, you won’t really have to give blood, but seriously… its crazy out there). Keep copies of every check, every deposit and be prepared to produce them quickly. If you don’t know how to do online banking, now would be a good time to learn that as you may periodically have to update information between statements.
Beware of the rules of Lending, 1 of 12 Jobs.
May 3, 2012 by Elise Groves · Leave a Comment
They may be ridiculous, irritating and challenging,
but if you don’t heed these warnings and you break the rules,
your loan could be DENIED AT THE LAST MINUTE!
Check in every Tuesday and Thursday for this 12 part series geared towards the
DOs and DON’Ts During The Loan Process
1. DON’T CHANGE JOBS …or even worse…QUIT!! The lender is going to verbally verify your employment about a day before they fund your loan and if you have changed or quit you might be screwed. So stay at the same job throughout the loan process. Your loan is based on your ability to make the payments, and your job stability is a big factor. So hold on a little longer… and don’t you dare consider quitting and starting your own business until AFTER the escrow closes and you have moved into your new home. That could be a deal killer right there.
Speaking of jobs… PLEASE deposit your ENTIRE paycheck, THEN take a cash draw. DON’T go cash your check, keep your spending money for the week, then deposit the rest. It creates a paper trailing nightmare you don’t want to be a part of.
Wine Country First Mortgage Tip: Document Cash-to-Close
March 28, 2010 by Elise Groves · Leave a Comment
Providing proper asset documentation and the actual source of the funds is a critical element of the loan closing process.
There’s nothing worse in a real estate purchase than making it all the way through the hoops and hurdles just to have a loan denied after the final documents have been signed due to the borrower using the wrong checking account for the down payment.
Seasoning of the down payment money is just as important as the source, which is why underwriters typically require at least two months bank / asset statements in the initial mortgage approval process.
A Few Acceptable Sources Of Down Payment Include:
- Bank Accounts – checking / savings
- Investment Accounts – money market, mutual funds
- Retirement Funds – keep in mind that borrowing against a 401K plan will require a repayment, which will be calculated in the Debt-to-Income Ratio
- Life Insurance – Cash value and face amount
- Gifts – Family members can gift down payment funds with certain restrictions
- Inheritance / Trust Funds
- Government Grants – Many state, county and city agencies offer special down payment assistance programs
It is extremely important to make sure your loan officer is aware of the exact source of your down payment as early in the process as possible so that all necessary questions, documentation and explanations can be reviewed / approved by an underwriter.
A good rule-of-thumb to remember is that whatever funds you’re using as a down payment have to be pre-approved by an underwriter at the beginning of the mortgage approval process.
Basically, if you accidentally forget to deposit money in your checking account on the way to the closing appointment, it is not acceptable to get a cashier’s check from a friend’s account until you have a chance to pay them back later.
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Frequently Asked Questions:
Q: What if I don’t have a bank account and cannot properly source my funds to close?
Cash on hand is an acceptable source of funds for some loan programs, but make sure you bring that detail up at the application stage
Q: Can I use a bonus from my employer for my down payment?
Yes, but generally this needs to be a bonus you regularly receive
Q: Can I borrow the money from a friend?
No, any money that needs to be repaid is typically an unacceptable source of funds
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Related Articles – Closing Process / Costs
Wine Country First Mortgage Lingo
March 28, 2010 by Elise Groves · Leave a Comment
What the heck are they talking about?
Many borrowers go through the closing process in a haze, nodding, smiling, and signing through a bunch of noise that sounds like Greek.
Even though you may have put your trust in your real estate and mortgage team, it helps to understand some of the terminology so that you can pay attention to specific details that may impact the decisions you need to make.
Common Closing Terms / Processes:
1. Docs Sent –
Buyers sit on pins and needles through the approval process, waiting to find out if they meet the lender’s qualification requirements (which include items such as total expense to income, maximum loan amounts, loan-to-value ratios, credit, etc).
The term “docs sent” generally means you made it!! The lender’s closing department has sent the approved loan paperwork to the closing agent, which is usually an attorney or title company.
Keep in mind that there may be some prior to funding conditions the underwriter will need to verify before the deal can be considered fully approved.
2. Docs Signed –
Just what it implies. All documentation is signed, including the paperwork between the borrower and the lender which details the terms of the loan, and the contracts between the seller and buyer of the property.
This usually occurs at closing in the presence of the closing agent, bank representative, buyer and seller.
3. Funded –
Show me some money!
The actual funds are transferred from the lender to the closing agent, along with all applicable disclosures.
For a home purchase, if the closing occurs in the morning, the funds are generally sent the same day. If the closing occurs in the afternoon, the funds are usually transferred the next day.
The timing is different for refinancing transactions due to the right of rescission. This is the right (given automatically by law to the borrower) to back out of the transaction within three days of signing the loan documents. As a result, funds are not transferred until after the rescission period in a refinancing transaction, and are generally received on the fourth day after the paperwork is signed.
(Note – Saturdays are counted in the three day period, while Sundays are not). The right of rescission only applies to a property the borrower will live in, not investment properties.
4. Recorded –
Let’s make it official. The recording of the deed transfers title (legal ownership) of the property to the buyer. The title company or the attorney records the transaction in the county register where the property is located, usually immediately after closing.
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There you have it – an official translation of closing lingo.
As with any other important financial transaction, there are many steps, some of which are dictated by law, which must be followed.
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