The importance of properly documenting Non-Reported Cash Funds and Gifts from family or friends.  It’s a much easier conversation to handle these funding issues upfront than dealing with it after the fact. Start by understanding what funds are eligible for use for your loan  Non-Reported Cash Funds:  If you are earning non-reported money doing cash side jobs. This cash must be in your bank account for a period of 60 days in order for these funds to be considered seasoned otherwise cash funds are ineligible as consideration for procuring a home loan Gifts from Family and/or Friends:  All moneys in the form of a gift in accordance for reserves or cash to close must be documented and sourced that  clearly shows a beginning point and an end point, and it documents  how the money moves from point A to point Z.   For example, let’s say a parent or friend is giving you a gift of $5,000 to purchase a home or even help you qualify for a loan.  In order apply these funds you will have to create a sufficient paper trail would look something like this:  money originates from a parent or friends bank account, money is transferred from a parent or friends account to your bank account, and from your bank account the money is then wired into escrow. Sounds simple enough right? Well it is and it isn’t. The following is typically what’s needed to create a paper trail for the purposes of securing a home loan: 1. Full original bank account statement to show where the money begins. 2. Executed gift letter shows who’s giving the money and states the relationship between the parties. 3. Bank printout showing the “available” deposit of the gift funds into your bank account. Bottom Line!  Any cash deposits on your bank statement not derived from your employment, you will need to source and document where the cash deposits are coming from. If these funds cannot be sourced, we will subtract these funds from your reserves or cash to close and will disallow the use of these monies. The following funds do not have to be sourced: Assets in any form of a bank account that are solely your funds where the funds have been for the last 60 days. Assets you have in your bank account coming in the form of your income, such as from your paycheck. How to document odd ball funds: Sale of personal property such as a car, boat, motorcycle etc. can be documented with a bill of sale executed by both parties clearly showing the purchase price and all the components of the transaction along with the money going into your bank account with a copy of the bank statement showing those funds as “available.” Generally no paper trail will be required for: Cash deposits by paying someone else’s debt such as an auto loan can be sourced so long as the person making the monthly payment consistently pays the monthly debt obligation in one form, meaning every month the debt obligation is paid by cash alone or by a payment directly to the creditor. This gets challenging to be able to accurately document when the obligation is paid erratically in a combination of cash and credit. Business funds deposited into a bank account will cause the mortgage lender to require a letter from a tax professional stating the borrower’s business will not be negatively impacted by the co-mingling or use of business funds in consideration for securing a mortgage, along with the bank statements and general paper trail. Qualifying for mortgage loan financing today leaves no stone unturned. By making sure all monies are well documented, you’ll be well on your way to successfully securing that home loan.
How to Properly Document Cash and Gifts
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