Mattress cash is not king when it comes to mortgage application
Vinh Tran is a Loan Officer with Fairway Independent Mortgage. He is also a CE instructor for Realtors at the St Louis Association of Realtors. He is committed to educating borrowers which he feels helps eliminate some of their anxieties. He feels that when borrowers understand the process and the reason for some of the bank requirements, it makes for a smoother transaction and a lot less stress.
The following article which he authored was recently published in the St Louis Post Dispatch and is helpful for all potential buyers.
Everywhere you go on this planet, cash is indeed king. But when it comes to buying real estate in America, that’s only true if you can pay 100% cash. When taking out a mortgage, whether it’s 5% or 95% against the value, your cash is inspected under a microscope. This is a reality of our post 9/11 world.
The Patriot Act was enacted after the events of 9/11 to defend against terrorist money laundering activities. The average person understands and tolerates TSA screening because there is a direct safety benefit. When it comes to a mortgage, and consumers are using their hard earned cash, the direct correlation is not so apparent.
The nostalgic days of a quick hand shake because we know “where you live” no longer exist. Now, even if the lender “trusts” you, they must have bank statements to verify that funds are legitimate. I tell my clients that the scrutiny of their funds used in a mortgage transaction was never meant to make sense to the average law abiding citizen. Instead, if they can for a moment envision how a terrorist would move money for illegal enterprises, they can better tolerate the compliance requirements of lending institutions… just like TSA screening. Furthermore, this scrutiny is not a matter of trust between them and the lender. Investors who buy your loan from your lender don’t care if your lender trusts you or not. What they care about is whether the required bank statements are included in the file; otherwise your lender may be stuck with that loan (“bad inventory”) because it is not compliant with the laws. The only way most lenders can make money in the transaction is to sell their inventory, which allows them to recapitalize and keep originating loans.
As a mortgage professional, I have to ask… Where is your money today and where has it been for the last 90 days? If it is already in a savings or checking account, IRA, etc., and the last two months of bank statements do not have any large cash deposits (over $500), we are able to move forward. Otherwise, these cash deposits could render the entire bank account’s funds ineligible for use towards the mortgage transaction. So what about your “mattress money” and what do you do about the “large” deposits you’ve already made? This is where you need a professional to help you understand the laws and processes and to plan accordingly to prevent delays in closing.
Shopping for a mortgage is not merely about getting the lowest interest rate and fees. Now more than ever, it IS about working with the most competent professional. If you have to have surgery next week, do you care if your surgeon is the cheapest in town, or are you interested in his success rate? Success rate in the mortgage world should be defined as the ability to educate you on the regulatory climate, communicate all available options to you, set accurate expectations, and have the best processing and underwriting capabilities so your mortgage will close on time. The cheapest guy in town can “save” you a few bucks but may short change you on loan options and expertise. Ultimately, the real cost could come in the loss of earnest money and the home of your dreams, or even a potential lawsuit.
Next time you shop for a mortgage professional, consider shopping like you would shop for your surgeon.
Vinh Tran, Fairway Independent Mortgage
12125 Woodcrest Executive Drive
Saint Louis, MO 63141