"Experience is a hard teacher because she gives the test first, the lesson afterward." ~ Vernon Law

As mortgage lenders we often see buyers trying to use money that "magically" appears in their account or client's that have businesses and may have cash they want to use for the down-payment on their new home.  All lenders require that down-payment and reserve funds be seasoned.  So what does this mean? (no it is not mesquite flavored :)

Seasoned funds are funds that have been in a client's account for 90-days or more.  Fannie, Freddie and all government loans require that the last two months banks statements and financial statements be supplied to demonstrate the necessary funds for closing on a loan and also to provide proof of liquid reserves to close.  Reserves; Fannie and Freddie loans require 2 months of principle, interest, taxes, insurance and HOA dues worth of funds to be in reserve (left over after closing on your loan) for an owner occupied purchase of a property.

When reviewing bank statements an underwriter will require that any large deposits shown on the statements be explained and the funds must have an audit trail (canceled checks or a reasonable explanation) as to where the funds came from - no they cannot magically appear.  This is extremely important on Fannie and Freddie loans as borrowers must have a minimum of 5% of their own funds into the purchase of a property.  The only exception to the rule is when over 20% of the down-payment is gifted.

Seasoning is a very important part of buying a home when funds may come from different sources.  Knowledge is power and may just make the difference for getting you a loan with the lowest monthly payment.

As always Deanna and I are here to answer any lending questions you may have. All our best to you for a great week!

All our best for the upcoming week.

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                              
 
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.
This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 7/5/2010