Show Me The Money!

Remember that famous line from the 1996 film, Jerry Maguire?  Actor Cuba Gooding, Jr. made this line famous and throughout the years . . . always evokes a sense of humor and lightheartedness.

Today, in the modern world of mortgage lending . . . show me the money has to do with proof of funds.  Where did the monies come from?  Bank statements have become increasingly scrutinized, especially in respect to “non payroll” deposits.

What is the solution . . . I have a conversation in the beginning of the relationship letting my clients know the importance of being able to document their deposits into the bank.  I stress the importance of not having a lot of deposits that they cannot document.

We all receive checks or cash for various reasons, but from the mortgage qualifying and underwriting standpoint, we really need you to “show us the money!”  Some recommendations for best outcomes.

1) If you receive a check from someone paying you back for something, selling something, etc. its actually better to just cash the check, rather than deposit it.  Once deposited, we need to know source, have copy of the check, letter of explanation, and if you originally loaned the money proof when you originally loaned the money out.  You see where I am going with this?  Unless, it is pretty cut and dry, easily document-able, etc. go ahead and deposit–otherwise find another option.  You can even deposit into an account that is not being used for the transaction, such as a savings account where no funds are being used or transferred for your transaction.

2) Consider gift funds in lieu of other when you have deposit patterns that are not easily document-able.  Gift funds can be used in most loan programs as part of down payment, closing costs, or combination of the two.  FHA allows 100% gift funds, whereas most conventional requires you have at least five percent of your own funds before applying any gift funds.  The donor will provide an official gift letter (may be required to be notarized) with proof of funds (bank statement)–showing donors ability to gift the funds.

It is a tough but rewarding process in qualifying and closing on your next mortgage transaction.  If you take pro-active steps you won’t be nervous when your loan officer or banker ask the question, “show me the money!”