The Office of Lender Activities and Program Compliance department of FHA just released the June report on Post-Endorsement Technical Loan Reviews. That’s a fancy way of saying: They’re showing us what’s wrong with loan files after closing, in an effort to clean up the front end of the loan process.
“Unacceptable, unsupported, or insufficient” source of funds, and “concerns related to assets derived from gifts” made up the lion’s share of problems. It really does matter where your closing money is coming from.
These days, you’re asked to show the last two months of your bank statements, all pages, for any accounts you’re using as your down payment and closing costs. All deposits must be accounted for, meaning they are either electronic deposits of your payroll, or we need a copy of the deposited checks and a full explanation (and source) of where they came from. Any large deposits will be questioned. If you’ve been stashing cash for an emergency, and want to use it to buy a home, you’d better get to the bank now and deposit it. We don’t want to see it on the two bank statements you submit with your loan application.
“Obligations of borrower, or borrower’s spouse, omitted, inaccurate, or not disclosed” was the next item of concern. Congress is watching to be sure lenders are making loans to borrowers who have the ability to repay the debt, so if there are loan payments or other financial obligations you don’t tell us about, we all get in trouble. I’ll warn you again: Don’t get any new financing before you close escrow, even if it means missing out on six-months-zero-interest on your new appliances!
“Income improperly documented or from an unacceptable source” rounds up the three major topics of concern. Not only will you show us your last two federal tax returns, all pages, but we’ll validate those with the IRS to be sure the figures match. If you’re writing off expenses to get a bigger tax deduction, some of those will be used against you in qualifying. If you’re telling the government it costs you for union dues, or travel, or education in order to do your job, those will count as reductions in the amount of income you have to repay our loan. Especially for those who are self-employed, better to meet with your mortgage advisor well in advance of choosing a Realtor, to be certain all the numbers work.
All that being said: There is still plenty of financing available to buy or refinance your home. Just know that we’ll be very thorough in documenting every detail of your financial life in the process.
Tammy Engel is your local Mortgage Advisor, and has been working for your best interest throughout California since 1990. Contact her at 661/822-REAL for financing your purchase, refinance, or reverse mortgage.