USDA underwriter questioning cash deposit after apprasial and repairs. (loan officer, interest rate, approved)
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I am actually posting this looking for some good news for my mother. At the age of 51 she has finally decided to purchase her first home! She has been employed by our state for the last 32 years, and has rented the same home since her divorce 18 years ago. She found the perfect little home for her, a great place to build memories with the grandchild, and just a place to call "hers". She was smart and talked with s mortgage broker first to see what the price range she was looking st, to keep the mortgage around the same price as her rent, and she actually found her dream home at $100 less than what the mortgage broker told her to look for. She's been very nervous through the process, as she doesn't really understand everything, but her realtor and mortgage broker have been working great to keep her in the loop. When she decided to put an offer in on the home, the realtor told her she would need to bring $1000 hand money, when submitting the offer. Not knowing any better, she deposited $1,500 in the bank, and wrote the check for the earnest money. She has been putting a little money back here and there for about a year (when she decided she wanted to purchase a home, so she's had a little saved up). All seemed to be going well, The appraisal was done, and failed for some minor things (hand rails, paint, lack of heat in bedrooms etc.), the property is a bank owned home, so seller refused to complete repairs, so as a family we all pitched in to help her get the repairs done really quickly, at her expense. The appraiser went back to the house today and passed it. Woohoo! Then my mother got an email from her mortgage broker letting her know the USDA is wanting to know where her deposit of $1,500 came from, when she put in the offer. She emailed back letting them know it was just cash she had been saving, but now that I'm reading some stuff online, I'm seeing that depositing the saved cash wasn't a very good thing. Wish she knew that sooner ;( but my question is, is it possible for USDA to deny her loan this far in the process? Closing is supposed to be in 3 days, she was preapproved, then after the offer was submitted and accepted, her mortgage broker got another approval, and we thought she was just waiting for the home to pass USDA appraisal, which is has now. Is there a chance of her getting denied now, because of the cash thing? We looked through her bank statements and she has tons of ATM withdraws, which is what she would take the cash from, and put aside at home. I know the best thing is probably to wait to hear back from the mortgage broker again, and my heart is hurting for her, as I know she is worried sick she is going to lose the house of her dreams, and all the money she has already invested in fixing it up to USDA standards.
Kristie, I see a couple eyebrow raisers in your post, but congratulations to mom. Without knowing her income, I can't tell you if having $1500 in cash laying around is unrealistic for her income or not. But if she is 51, she surely has to understand no matter how many experts she surrounds herself with, there's no substitute for personal time and investment on the most expensive purchase of her lifetime. And by that I mean, if she had attended just one first time homebuyer class (that are free or online), the sourcing of deposits would have been covered. Or, any ony of the 1000's of articles focused on first time buyers. Most loan officers have a "what not to do" list for their buyers. I send it out religiously - but hate to tell you how many do not even read it. (Only two buyers have postponed realizing potential problems). But, by the time we (loan officers) get the buyers, they are in contract mode and may or may not have read what not to do and we are stuck with what we have to work with.
What has me scratching my head is how the family got into a bank owned property to do repairs. We've had this discussion many times here, as banks are notorious for not only not doing repairs, but not allowing others at their own expense do the repairs. In some (many) areas, this could be considered breaking and entering. The liability is so huge, no one will give permission for someone to go in and make repairs. Besides injuries on the property, there's the worry about mechanical liens on the property. And if the agents let everyone in without the seller's authorization, shame on them for the risk they took.
If I had to put money on the closing occurring on time (now in 2 days), I will predict not likely, but I also don't see a show-stopper either. If settlement is delayed, don't panic, the finish line is in sight.
Smart Money, we've never heard of any classes (we live in a very very small town). She had talked with the mortgage broker about a year ago, and then put the process off when she couldn't find anything that really fit her budget, that looked appealing. We found this house online, and actually she got approved by the bank that owned the house, but when they came back saying her interest rate was going to be 8.9% I told her to talk to a local broker rather than the bank that owns the house. So she called this very nice woman back, and she recommended a realtor, who we should talk to. The bank that owns the home is out of state (across the country) and actually just gave us the key code to get in ourselves, even without the realtor. When they came back and said no to fixing the repairs, they did have my mom sign a form saying they grant her permission to make repairs at her cost, but they could not be held liable in the event there was an injury or anything like that. Realtor and broker didn't mention that this was a no no. Lol.
Anyways broker called my mom today and told her that the cash deposit was no longer and issue, since she was honest and just said was money she's been setting aside (I actually think they just took that money out of the picture). But the broker said everything is good so far, just waiting on the title company to give her a closing date, which we should know by Froday. So looked like she will for sure be pushed back in closing, but hopefully not by much.
I'm pleased to hear this is working out for mom. But tell her to stop withdrawing money from the ATM and saving it under the mattress! Help her understand that a separate savings account at the bank should be established for any emergency and future home maitenance expenses.
Smart Money, we've never heard of any classes (we live in a very very small town). She had talked with the mortgage broker about a year ago, and then put the process off when she couldn't find anything that really fit her budget, that looked appealing. We found this house online, and actually she got approved by the bank that owned the house, but when they came back saying her interest rate was going to be 8.9% I told her to talk to a local broker rather than the bank that owns the house. So she called this very nice woman back, and she recommended a realtor, who we should talk to. The bank that owns the home is out of state (across the country) and actually just gave us the key code to get in ourselves, even without the realtor. When they came back and said no to fixing the repairs, they did have my mom sign a form saying they grant her permission to make repairs at her cost, but they could not be held liable in the event there was an injury or anything like that. Realtor and broker didn't mention that this was a no no. Lol.
Anyways broker called my mom today and told her that the cash deposit was no longer and issue, since she was honest and just said was money she's been setting aside (I actually think they just took that money out of the picture). But the broker said everything is good so far, just waiting on the title company to give her a closing date, which we should know by Froday. So looked like she will for sure be pushed back in closing, but hopefully not by much.
I'm glad it's resolved but having cash on hand is not a crime. The new rules do force them to ask. The only issue would be is your mom is on any public assistance and she is not allowed to have more than a certain amount in the bank and cash on hand but that's not a mortgage issue it's with the agencies that give the benefits. The Dodd Frank act was supposed to help weed out illegal money from drug sales but it doesn't seem to do that, it's more of a hindrance to decent people.
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