Move Money Around
Buying a home is easily one of the five most important purchases you will make in your lifetime. Besides the considerable investment that you have to make to buy a home, there is also how long you will live in your home and also the considerable statement you will make by owning a home. Home ownership means that you will own an object that will say more about who you are than any words that come from your mouth. The type of home as well as the way that you decorate it will give people a window into your soul and mind.
However, before you get to express yourself through a home there is the whole process involved in buying a home. Buying a home can be a time consuming process and it should be considering how important your home is going to be during your lifetime. There is the considerable amount of time you will have to devote to going to open houses and taking one on one tours of homes that you have identified as having some interest in. Of course, once you've finally identified the home of your dreams that is suitable to where you are in your life, all things are over. Right?
Unfortunately this isn't always the case. Finding a home that you want to buy is significantly easier than actually paying for it. In many ways, obtaining the financing necessary to buy a home is much more difficult than finding a home that you want to buy. Unless you have the savings to pay for a home at your disposable, your home ownership aspirations will not be achieved until you acquire financing through a loan source.
Loan Requirements
Regardless of where you receive your home loan, there are a number of requirements that your loan source will impose on your path to buying a home. These requirements are imposed as a way for the loan source to protect their financial interests while ensuring that you are serious about your intent to buy a home. Therefore there are a number of actions that you just don't do before buying a home due to its effect on financing. One such act is move money around.
Although the act of moving money around may seem to you as something that is purely your business and should have no effect on obtaining financing, the fact of the matter is that this is not the case. Moving money around will, at best, cause you headaches because your loan source will demand that they receive the paper trail of your transactions, and, at worst, will cause your loan source to take away their financing from you.
Example
Take this example of Aaron Brim, a supervisor at a food manufacturing company in Iowa. Aaron Brim had found a three-story, five-bedroom home located on the outskirts of Des Moines that was perfect for his growing family. A financially responsible man, Aaron Brim decided that the best way to make the home buying process go faster was to consolidate all of his savings into one account. Unfortunately, Aaron Brim had already gone through the process of qualifying for a loan and one night received a frantic call from his loan source.
It seems that his loan source had just detected Aaron's transactions and was confused and even a little bit angry. Although Aaron tried to calmly explain that the reason why all of these financial changes took place among his accounts were to make it easier for the lender to see that he had the necessary financial means required to obtain the home loan. However, the lender didn't see it this way and warily told Aaron to come to his office tomorrow for a meeting.
The meeting between Aaron and his lender was not a pleasant one for either side. While Aaron Brim tried to reiterate his good intentions, the lender dismissed his rationale. To be fair to the lender, he had good reasons to be upset about Aaron's actions. When Aaron offered to reverse all of his transactions, the lender was appalled. This was because the lender is responsible for properly documenting the source of their client's funds as a requirement for loans and Aaron's act of moving money around has made things significantly difficult for him.
To finish up this story, Aaron's financing problems were finally sorted but after much time and unnecessary frustration had past. Aaron Brim and his lender had grown jaded, which made their future dealings less pleasant. However, Aaron did eventually acquire that three-story, five-bedroom home but had to work much harder than he had to if he didn't move money around.
The impact of moving money around, as Aaron's experience will illustrate, makes things much more difficult for a prospective homebuyer's loan source. Although this may warrant little concern for some homebuyers, the fact of the matter is that in many ways your loan source is the most important person you will have to deal with while trying to buy a home.
Why Is Moving Money A Bad Idea?
To understand why moving money around before buying a home is not the best of ideas, it is important to understand the process in which a home loan is approved. Considering the vast amount of money that is involved in home loans, it is understandable to see why lenders are concerned, almost to the point of paranoia, when it comes to analyzing their client's financial actions.
After you have submitted your loan package for approval, a lender will review your loan application and examine a variety of factors before approving your loan package. Common concerns among lenders are the source of funds that will be required for the down payment and closing costs attached to purchasing a home. A down payment is the part of the purchase price of a home that the buyer does not finance with a mortgage but pays in cash. Closing costs are the expenses that are incurred by the home seller and the homebuyer related to fees and services involved in the transfer of property ownership. These two groups of fees are not covered in a mortgage payment and are the responsibility of the homebuyer. However, they also serve as a sign to your lender that you are financially able to handle the monthly mortgage payments that you will have to pay for over a course of many, many months or years.
Proving Financial Stability
As a way to measure your financial ability and the reliability of your financing sources, your lender will often ask that you provide statements for the last two to three months on all of any of your liquid assets as well as your financial accounts. These will include:
· checking accounts
· saving accounts
· money market funds
· certificates of deposit
· stock statements
· mutual funds
· 401K accounts
· retirement accounts
Therefore, when you move money around your various accounts, you are no longer making financial decisions based on your own discretion. Your lender will also view these financial movements between your accounts and will immediately raise red flags if they notice any large deposits or withdrawals within your accounts.
The thorough nature that a lender will employ while they analyze your financial accounts is based on the requirements of their job. In order to eliminate potential fraud and to ensure quality control, your lender is required to completely document the source of all funds before approving a loan. Therefore, moving money around, regardless of your intention, will make it significantly difficult for your lender to properly document the source of your funds.
Although moving money around your accounts will not necessarily mean that you will lose your loan financing, it will mean that the process of acquiring a loan will be considerably slower. The mortgage underwriter, who is the person who approves loans, will usually ask that you provide a complete paper trail of all the withdrawals and deposits for all of your accounts. A tedious process, you will be required to produce such seemingly inconsequential financial data as cancelled checks and deposit receipts to the mortgage underwriter. Failure to produce these documents will usually mean that your loan package will be rejected and that you will need to find a new source for home financing.
This information should not preclude you from moving money around your accounts if it is absolutely necessary for you to do so. However, you should keep all financial documents that detail all of your transactions as a way to prepare for future consultations with a mortgage underwriter. Considering how much emphasis lenders place on financial consistency, moving money around is the way to go if you want to make buying a home harder than it already is.
Considering how much emphasis loan sources place on a consistent financial record among their prospective clients, it should go without saying that if you shouldn't move money around that you should also not change banks while you are in the midst of applying for a home loan. By keeping a relatively stable financial history during the home buying process, you will be saving yourself many headaches that come when you make a number of financial changes in your accounts.
