New mortgage loan requirements?

[heyaim]

I have a friend who is in the process of building a house through a large home builder. He told me today that underwriting is now requiring 12 months of mortgage payments in a savings account for the loan to go through. On top of that, they keep an eye on his bank accounts and question transactions often. Ex: He had a $100 Christmas gift he deposited...they questioned where the money came from.

I know nothing about building or living in a city subdivision. We have lived outside of the city limits on 2 acres since 1998.

Anyone hear of this? Is this something new with mortgage loans? He may have some negative things on his credit report and the bank is just making him jump through hoops to finalize his loan!?!?

[elfen lied]

Last I checked, dividends, interest and other income from investments was as green and spent as freely as any other kind of money. It's hardly Monopoly play money. So I don't get why the contemptuous attitude. (Our investment income wasn't counted toward our total income for the year or used to offset any losses claimed on our Schedule D.)

[siggy_freud]

12 months is a bit high. Is this a second home or investment home, or will it be the primary? Most lenders I know of look for 2-6 months. What type of loan is he trying to get?

[~bs]

I have a friend who is in the process of building a house through a large home builder. He told me today that underwriting is now requiring 12 months of mortgage payments in a savings account for the loan to go through. On top of that, they keep an eye on his bank accounts and question transactions often. Ex: He had a $100 Christmas gift he deposited...they questioned where the money came from.

I know nothing about building or living in a city subdivision. We have lived outside of the city limits on 2 acres since 1998.

Anyone hear of this? Is this something new with mortgage loans? He may have some negative things on his credit report and the bank is just making him jump through hoops to finalize his loan!?!?

Nowadays, lenders are far more strict. Especially if it's a second or rental property.

[Baby_nurse]

It may be because he has taken out a builders/construction loan versus a standard mortgage. The terms for those have gotten much stricter since the housing crunch. Too many builders walked away from those loans when they couldn't sell their spec houses.

[kork13]

I bought my first home last Autumn, and was surprised at the level of "nit-noid-iness" that they followed while going through my financials. They wanted positive proof of sourcing from every deposit into my accounts from the previous 4 months or so, and balances/activity on every single one of my cash/investment/retirement accounts, even though just 2 savings accounts & my investment account were the only ones on the table for producing my downpayment. Extremely intrusive IMO, but apparently the norm in today's mortgage industry. It has nothing to do with credit worthiness (my score was about 790 at the time) and nothing to do with funding (I was putting down 25%, and could have easily put more than 50% down). The mortgage company was simply turning every stone because they feel it is necessary. Offensive? Perhaps. But then, when has the banking industry ever cared about what their customers thought?

[snafu]

Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co., Citigroup Inc. and Ally Financial Inc. are part of an announced Fed settlement of $766.5 million in fines against the five large banks might be explain why mortgage documentation is being so detailed.

[ua_guy]

If I had to hazard a guess, he's borrowed a substantial amount of money in the form of a construction loan that rolls to a conventional when the building is complete. He probably had to put a sizable chunk of money down, and if he's carrying a second property, underwriters want to see the ability to cover both properties should things hang or if snags are encountered.

I don't think it's so much about a measly $100 that the bank is concerned about...it's the underwriters looking at his sources of income and not being able to explain why additional money is being dropped in the bank.

[Donal]

Different lenders have their different criteria. One of my cousin also took loan for the same purpose but he never had this kind of troubles.

[grumpter]

Luckily you can comparison shop without getting many dings to your credit report (theoretically). If their current intended provider is givng them hassles they can always try other providers. The nice thing about different rules is you can find a service that accomodates people like you rather than everyone paying the same rate no matter what their history.

[elessar78]

Yeah, we got hassled about every deposit transaction over $300. During our loan approval. Obviously a lot of it was the 2 weeks prior to closing and I'm trying to think of every check my family gave me.

For example, we'd go out to dinner and I'd put it on my card and my mom would reimburse me for their share AND lump in another monies (like birthday gifts to the kids).