Why Lenders “Source” Down Payment and Closing Funds
July 3rd, 2013
July 3rd, 2013
When you hear and read news accounts that report “credit is tighter,” they’re often referring to the requirements surrounding the “sourcing” or verification of the funds that will be used for a down payment or closing costs.
When you take out a loan, the standard guideline is the funds you’ll use for closing should be in your savings or checking account for two months prior to closing. So if you’re purchasing a home that would mean you need the money covering the 20% down payment and the closing costs in your bank account for at least two months. For a refinance, you may need a few thousand dollars in your account for that time period.
When the lender sources your funds, they want to know where the money is coming from. And they want to make sure it’s coming from you and not someone else. So if any large deposits are placed into your account outside of your normal income, the lender (in other words, the underwriter) needs to know the source of this money.
There are several reasons why the underwriter needs to know where your funds are coming from:
While the underwriter’s requests may seem petty to you, they’re really not. It’s in your best interest to provide all the documentation your lender requires to source your loan.
If you have any questions about sourcing your loan funds, talk to the mortgage specialists at Grandview Lending. We can help you understand the requirements for taking out your loan.
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