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Old 08-03-2011, 12:57 PM
 
3 posts, read 33,238 times
Reputation: 10

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If someone could attempt to shed some light on this situation i would greatly appreciate. My husband is trying attain a FHA mortgage in Georgia. He is self employed with 2 years taxes filed, good credit, and money in bank.

We were told by mortgage lender that an approval looked good, until she found overdraft fees in the account. We have other accounts that did not incur fees, however this is the only one that shows a balance with enough funds to close.

Her solution was to deposit the money in a different account and let the money sit there for 60 days, so that it is seasoned. Or, deposit then money in a different account then provide a gift letter from relative along with statements.

He does not have any relatices willing to provide their statements.

Ok, so my first question is: Is waiting an additional sixty days with a brand new account our only option?

My second issue is, If were going to wait Id like to add to the balance to increase our chances of approval. But if we make periodic deposits to the new account, will they question the source of those to? No outrageous large amounts, maybe like $500-$1000 at a time.

The money comes from the business, and we could provide the business bank statements as proof of source, or even transfer directly from the business checking account, But i read somewhere that you shouldn’t do that. Now I’m confused about that as well.

So that’s my second question, …How can i provide the source of newly deposited funds if he's self employed. Because its not like he receives a regular paycheck, But he does draw from the business account regularly for personal income.
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Old 08-03-2011, 11:04 PM
 
3 posts, read 33,238 times
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Wow Anyone? I am desperate for answers, before I move the money. Im also thinking of going to a different broker all together, because i did ask my broker these things as well and really didnt get a clear answer. Any response at all would be appreciated….For instance, What worked for you? Any other self employed people out there with mortgages? lol… Any underwriters?

After reading through some posts i see that the gift letter has worked for most..But it simply will not for us. In our family we are the go-to people when someone needs cash, so sadly we dont have anyone in the position to help us out in that way.

It was waaaay easier when i bought a house a few years back, and i always thought the income and ratios were the most important factor when buying a home (outside of credit),…I just cannot imagine that a silly oversight that happened months ago can completely ruin a deal….

oh well..,
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Old 08-04-2011, 11:56 AM
 
Location: Austin Area
110 posts, read 156,003 times
Reputation: 332
I would call a different mortgage lender. First off the whole "get a family member to sign a gift letter" when the money is not a gift is asking you and your family to commit fraud. Lenders do not like that.

He/she is also confusing me. They want you to move the money and wait 60 days to hide overdraft fees. If you are providing only 2 mos worth of statements to show funds, why not just wait a couple of months for clean bank statements and stick with your same account? Furthermore, there is a big chance the lender will want to see year-to-date bank statements to show income (because he is self-employed) and/or regular deposits. In such a case, you will have to provide the statements with the overdraft fees anyways.

Talk to someone else (or maybe TWO someone elses) that will be honest and up-front and won't have you worried about rushing around to make up some story AND signing your name on a Federal document with falsified information.

Hope that helps and good luck!
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Old 08-04-2011, 12:31 PM
 
45 posts, read 426,167 times
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i though lenders normally just ask for a letter of explaination for the over draft ? it sounds crazy if the bank wont give you a loan just because of over drafts ?
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Old 08-04-2011, 12:37 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
39,418 posts, read 70,704,356 times
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They have really tightened up, especially on people who have undocumented income such as the self employed. Any blemish such as returned checks is going to be a big problem.
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Old 08-04-2011, 01:37 PM
 
Location: 92037
4,630 posts, read 9,801,710 times
Reputation: 1954
kimoralee,

There are a lot of things that dont look rosy from your post. There are lots of red flags that I potentially see if I were wearing an underwriter hat. The advice you got from the lender sounds suspect at best.

Whenever shifting of funds or source of funds is involved, its a no no. Keep in mind that even if what you are trying to do has good intentions, it wears a mask of fraud all over it. Especially if this an FHA you can forget about the loan.
60 days worth of bank statements is hogwash. Any reputable lender I know is asking for all accounts and sometimes as far back as 6 months+. Considering your husband is self employed they are going to ask for more months of statements as well as all bounced checks or cash deposits.
While a letter might be okay, the dollar amount may be dependent on letter to list as 'forgiveable' if you dont have a receipt.
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Old 08-04-2011, 06:42 PM
 
3 posts, read 33,238 times
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I totally agree with all of you, so I will be speaking with someone new that was referred tomorrow. Im thinking atleast if we keep the money where it is we'd have less of a hard time showing how we normally deposit funds and would be able to provide more statements if needed.
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Old 08-07-2011, 08:28 AM
 
Location: MID ATLANTIC
8,421 posts, read 21,682,076 times
Reputation: 9940
Here's the deal - you really have a couple of different issues floating around here. All funds for a federally insured mortgage must be documented for the transaction. This even includes your not outrageous $500 - $1000 deposits. Every nickel must be "sourced." Money that is considered your own are funds that have been "seasoned" for 60 days. If they have been in your account for this length of time, where they came from before that does not matter. Anytime you transfer funds from one account to another triggers a 60 day bank statement fee from the account the funds came from. As far as the funds coming out of the business, the underwriter would want to see the lack of funds would not create a hardship for the business - an accountants letter would most likely be warranted. (Just an opinion that pulling $xxxx out of the business would have no impact). But that lends to another question.....how is your husband paying himself now, without the miscellaneous deposits? Is he a W2 employee of his own company? Or is he Schedule C?

Overdrafts - Overdrafts are a red flag for potential financial instability and should be examined with close scrutiny. Many banks require 12 months statements for the account that had overdrafts to prove this was a one time occurance. This is completely different than someone that has overdraft protection and can show a track record of paying the overdraft line of credit off in full on a regular basis. The fact you are showing NSF fees makes me the latter is not the case. If the file is marginal, this would not lead to a favorable conclusion.

You don't mention if you are under contract or just starting. If just starting, the first lender is just cutting the chase and giving you the correct answer - wait 60 days until your money is seasoned and your bank accounts don't show any NSFs. The work around is a gift, but you mention that is out of the question. Another alternative that may fall short - the Verification of Deposit. It's a form that asks for the current balance and the past two month's average. The problem with that, there's another block where remarks may be added. It's possible they could commnet on your NSF in the remarks section.

I think you are going to find the same results wherever you go......the second lender may make it a bit easier to swallow, but I'm pretty condifient the answer will be the same. Or, they could give you a different answer now just to get you in the door, to only later tell you to wait.
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