You might be lucky enough to receive a windfall or a cash gift that you want to apply to your down payment before the closing — but this can become a logistical minefield if you don’t keep a careful record of where the funds came from.
“Large cash deposits that the buyer wants to apply to their qualifications cannot be documented if we can’t prove the source for those deposits,” said Hubert. “These deposits basically have to be backed up by bank statements.”
Transferring money between multiple bank accounts in the closing process is another big mistake, according to Hubert — “This creates a paperwork nightmare, and there’s no reason to do it.” Even something as seemingly innocuous as opening a new credit card or bank account can throw your application out of whack, as it can interrupt the careful process of underwriting your loan.
Hubert explained that if you open a new bank account, the loan officer must document the source of the funds used to open the account.
“In a perfect world, if you went to Chase Bank, withdrew $5,000, and then got a cashier’s check to open the new account somewhere else, it might not be a big deal,” he said. “But people often open new accounts with cash money that they’ve saved up at home.”
When it comes to new credit, this can throw off your all-important debt to income ratio. Many lenders will re-run your credit report right before closing the loan and if new accounts appear, it could cause delays.