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November 25, 2013

Source Your Funds & Avoid Closing Delays

One of the easiest ways to derail or delay a home purchase is to start pulling in money from undisclosed sources during the escrow process. It is critical these days to document all the sources for your funds with your lender.

Buyers in San Francisco often make home purchases with funds that may be coming from different sources. For example, there may be money coming from a 401K, or a family member who’s helping with the deposit. This is all fine, but the most important thing to recognize is that you need to disclose all fund sources to your lender.

This is because lenders are committed to verifying every dollar the borrower will be using for a down payment, closing costs and reserves, according to my colleagues at Guarantee Mortgage. So if, for example, you are making any non-payroll deposits into accounts that will be used to show sufficient assets for closing, you’ll need to show a paper trail.

If your deposit isn’t coming from one of your own accounts and is instead being wired in by a family member, the lender will need to see a gift letter for that money. The biggest sticking point is when buyers have funds wired into closing from a non-disclosed account. Lenders will want to see two months’ bank statements on such an account.

Best idea? Put your game plan together during your preapproval stage so you and the lender are clear about where all your purchase money is originating.

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