Friday, September 11, 2015

Lenders Follow the Money, Very Closely!

If you are buying a house and using a mortgage loan it is very important to follow the direction of the Loan Officer even when it seems redundant or even stupid. Ever since the 2008-09 crash the government has been putting banks beneath an ever watchful eye of regulators and under the oppressive thumb of the government. Every significant deposit or withdrawal into any account the borrower uses is carefully analyzed. The bank needs to know where the money came from and where it went.

Make no mistake about it, the bank will kill your deal and leave you standing at the proverbial altar with out so much as a Dear John letter if they can't "follow" the money trail to a happy place. by all means do not hide money under the mattress! Cash that magically appears from fairy dust will kill your deal faster than Superman saves Lois Lane.

Any funds used in the transaction should be well seasoned, in the account for several months or deposited from reliable traceable sources such as a payroll check, government agency, insurance company, pension fund, etc. Any larger deposits or withdrawals totaling more than a couple hundred dollars should be logged by the borrower so they can explain to the bank if needed. Also any funds used for the purchase of the home should be taken from the same account the borrower has reported to the lender. No funds should ever be sourced from an account the lender has not vetted.

So in short, your moving and decide to have a garage sale. You do well selling off your unwanted junk. You net a cool and crisp $600. So you deposit the cash into your account. Keep a log of where that $600 came from. A loan underwriter is trained to assume that anything unknown is corrupt. Did ISIS give you that $600? Did your uncle give it to you because you can't really afford to buy this house? Do you moonlight as cat-burglar and this was the loot money? I am not kidding. They are very concerned about the comings and goings of your finances. Remember they are about to loan you hundreds of thousands of dollars based on your promise to pay them back. You are going to have complete control over the very asset that is collateralizing the loan. It is serious business and it is not difficult to comply, but you must comply if you want to play in their vault.

Unfortunately we had some loose regulations prior to 2008 that lead some people and companies to be dishonest and deceitful in their business practices. This helped create a very bad financial collapse that cost the American taxpayers dearly. As is typical with government, there was a gross overreaction that has lead to somewhat oppressive regulations that now create a new series of headaches for the American people.

It is very important to understand the age old adage "Those that have the money, make the rules". Banks have the money and if you want their cash, you play by their rules. The banks have to play by the government rules for a similar reason.

So be mindful and get your dream house.

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