March 23, 2015

When considering buying a home, one of the first topics of conversation is the down payment (and closing costs) – how much is needed and where is it coming from. Do you know what’s OKAY and what’s NOT okay? While not everything is covered here, these are the most common money sources mentioned.

house_money_pile_shutterstock_83573653Acceptable Sources of Money

  • Deposit accounts, vested retirement accounts, stocks, bonds, trust funds
  • Gifts (minimum investment requirements)
  • Sale of asset (home, car, boat – proof required)
  • Secured loans: Vehicle, 401k, home equity
  • Rent-to-own: Credit toward down payment cannot exceed the difference between Market Rent and the Actual Rent paid for the last 12 months.
  • Seller contributions: Certain percentage of the sales price depending upon LTV (loan to value ratio) & Occupancy
  • Down payment assistance: Grant funds or community loans

Money in MattressUnacceptable Sources of Money

  • Undisclosed, interested-party contributions
  • Payment abatements
  • Sweat equity
  • Funds that have not been vested
  • Personal unsecured loans
  • Cash

The bottom line – Buyers will have to PROVE with documentation the source of their Down Payment funds. “Unacceptable sources” of these funds make it difficult to get approved for a mortgage loan. For this reason, speaking with a loan professional should be at the top of your To-Do list when contemplating the purchase of a home.

Rich and Jan McMillen

October 13, 2011

This was one of the easiest short sales we have handled until today

Last Monday our clients signed their loan docs so escrow could close Friday.  All they had to do was wire the rest of their down payment and closing costs to the title company.  Before leaving the office, the buyers were given the wiring instructions to give to their bank.

Being a techie and doing most of his banking online, he was used to sending wire transfers to family through the Bank of America website.  So as soon as he got to his computer, he completed the online form and felt comfortable that he had completed the task.  Unfortunately, what he actually sent was an ACH (Automated Clearing House) payment which is commonly called a wire transfer though that is not correct.

Though both ACH payment and the wire transfer are performed through the Federal Reserve Bank System, each is handled by different departments at a bank.  Also, a wire transfer is the movement of funds in real time.  Escrow usually has these “good funds” in a matter of hours so the transaction can proceed immediately.

The ACH payment is a batch-process; it is stored and forwarded for future settlement.  In other words, it takes longer (in this case three days) and they are not “good funds” as required by the title company.  Therefore, their wire was rejected today by the title company and sent back to Bank of America.

Our clients were told by a bank clerk that it could take up to a week for the funds to be put back into their account and then properly wired.  Unfortunately, that runs afoul of the deadline for closing as set by the conditions of approval for the short sale by the seller’s mortgage holder.

Following our advice, our clients went to their Bank of America branch and talked with the manager this time.  They were there for two hours as the manager not only talked to her ACH department, but the one at Union Bank (the title company’s bank).  She verified that the latter had received an authorization to return the funds which are to be transferred back tonight.  Once received, the funds will still need to be cleared through the electronic fraud department and reviewed, but there is now an escalation process in place.

The manager will be monitoring the situation tomorrow, and will execute the correct wiring instructions as soon as the funds are available.  At worse, this will push the closing until Tuesday, but we will still be on this side of the deadline date.

Rich and Jan McMillen