Many people think the word mortgage is synonymous with a loan. In truth, the word mortgage is a term that’s synonymous with lien, only specifically used in reference to real estate transactions. A mortgage provides protection for the lender in case of default by the borrower. When you close on a mortgage loan, the deed technically belongs to the bank until you pay off your financial obligation.
When you apply for a mortgage loan, the lender wants to know everything about you—from your job to the places you’ve lived to your payment history with other creditors. The same is true for any co-applicants. You may find the process a bit intimidating and revealing of your personal business, but lenders want to protect their interests and ensure that you’re not a risk to them.
As you navigate the mortgage closing process, you will be hearing from your lender regularly, particularly in the early stages. During the first couple of days or weeks after you sign your mortgage application, the lender will collect a pile of documents and schedule an appointment with an appraiser to verify the home’s value.
Mortgage lenders want to loan money to borrowers most likely to pay their mortgages on time. That usually means borrowers who have a reliable monthly stream of income. When lenders see that you deposited a large sum of money into your account before applying for a loan, they become suspicious that you might not normally have enough money in your account to handle the payments that will come with the mortgage loan you are seeking. If the majority of your savings were deposited into your bank account just days before you apply for a mortgage loan, your lender will wonder if you are receiving an emergency loan from someone to make it look like your finances are stronger than they are.
The Paper Trail
When lenders see a large deposit—typically larger than $1,000—they will want to see documentation tracing its origins. If you sold a second car that you no longer need for $5,000 and then deposited that money in your savings account, you’ll need to produce a receipt from that sale. Lenders won’t place as much weight on that one-time injection of cash when determining how large of a mortgage you can afford. Lenders instead focus on income streams that come into your household each month when deciding whether you can afford a specific mortgage payment.
You will not have to justify large deposits that are seasoned. Seasoned money refers to dollars that have been in your bank account for at least two or three months. When you apply for a mortgage, your lender may ask you to provide copies of your last two months’ savings and checking account statements.
Eli Garfinkel of Funding Resources Mortgage Company is an experienced and reputable loan officer. Eli specializes in customer service and dealing with complex cases. He will answer any mortgage questions, without any obligation. Contact him at 732.278.6526 or via email [email protected] or in the office at 732.364.7373 ext 22.
By Eli Garfinkel