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One of the most common frustrations I hear from Salem Oregon home buyers is that they are using GIFT funds for their down payment and they don’t understand why we have to pick apart the documentation…or even document it at all. This seems like a great place to shed some light on the whole gift issue, so here goes:

When Mom, Dad, Uncle Jim, or Aunt Sue agree to give you $5000 to buy a new home, it seems like they should be able to give you the money and everyone’s happy. Unfortunately, lending guidelines require a little more than that. The issue is that they *could* be giving you a gift, but they *could* be expecting you to repay them as well. Family members aren’t afraid to tell a little white lie for one another… So…what if you are to repay the “gift”? Is there a monthly payment? Can you actually qualify WITH the payment to your relative? There really is a reason for all the nit-picking, I promise!

Once we get past the gift letter and accept the fact that we need to document the gift funds, the next big issue comes up: “WHY do you need to prove that the gift DONOR had the money to give?!?” Well, we have to look at lending guidelines again and see the common sense answer. A family member is likely to GIVE money to help another family member out. There is a select group of relationships that are allowed to give a gift. Your next door neighbor may have the money, but if you convince him to give it to you, he’s most likely going to want it back, right? So…since your neighbor has the money, and Aunt Sue is an acceptable gift donor, wouldn’t it be simple for the neighbor to give Aunt Sue the money to give you? Then there would be a new debt to the neighbor… So, the solution is to make sure Aunt Sue actually had the money to give in the first place. It’s frustrating, but it’s the only way to avoid loan fraud and putting people in homes they can’t actually afford.

So, if you’re thinking of buying a home, and you plan on using a gift, take note of the items you’ll need to provide as documentation:

- Gift letter (provided by your lender)
- Copy of the gift check to you from the donor (Personal checks are best)
- Copy of the CANCELED check from the donor’s account (OR – if not a personal check – most recent bank statement from donor showing available funds, no unusual deposits, and the withdrawal of the gift)
- YOUR most recent bank statement, or transaction history signed by a teller, showing your balance after the gift was deposited.

If you gather this documentation carefully the first time around, the frustration level will drop considerably and the paperwork will cruise through underwriting.

One last tip: If you KNOW you’re going to be getting a gift, and you KNOW how much it will be…..deposit it in your bank account BEFORE you apply for your home loan, then you’ll ONLY need to provide a gift letter! It’s a little known secret that spares many a home buyer a ton of frustration and paperwork!

Please remember one last thing: in the world of home loans, the name of the game is DOCUMENTATION. It may seem excessive these days, but compared to the days of no documentation that got us in trouble, this is a good thing.

Carmen Babb is a Mortgage Consultant with Wells Fargo Home Loans here in Salem Oregon

Phone: 503-551-9690

MAC  P6202-024

I’ve been wanting to have some Salem Oregon  mortgage brokers do some guest posts for me because lending is so asinine these days, I thought it best if they could help explain the new and crazy process to you all. True to form, an underwriter is nit picking a transaction about the “paper trail.”    The paper trail is such a big deal in real estate right now I asked one of the mortgage brokers that I know to write me a bit about the paper trail.

So without further ado…here is information about the dreaded “paper trail”  by Carmen Babb.

As a lender, one of the most frequent lines I hear from customers is something like, “What more do you want from me?!” or “I never had to provide this for my last mortgage” and sometimes even “What are you going to ask for next: My blood type??” The truth is: home buyers get understandably frustrated because lending regulations require documentation on such a detailed level, it can be quite a process to satisfy an underwriter these days.

So…what’s the most common issue when it comes to documentation and home loans? MONEY! It seems simple to homebuyers: if you need $6,000 to close on your new purchase, then you come up with the money somehow, and it’s all good, right? Nope. Sorry, but it just isn’t that simple. Here is my best advice for home buyers:

• Meet with a mortgage consultant early on and determine how much money you will need
• Discuss where that money will be coming from with your mortgage consultant (be very specific – having money “in the bank” is different than withdrawing money from your 401(k) and depositing it into the bank)
• Work with your mortgage consultant to create a “paper trail” of ALL monies in your accounts. This means getting copies of all large deposits from your bank, documenting where the money came from, and documenting gift funds.
• Speaking of GIFT FUNDS – This deserves its own bullet point! When getting a gift from a relative or close friend, you must provide proof that the donor expects no repayment and had the money to give you, proof you deposited the money, and proof of your balance after depositing. The easiest way to do this is with a gift letter (provided by your mortgage consultant), a cancelled personal check from the donor, and a statement from your account showing the funds have been deposited. There’s also a little known secret: It’s even easier to get the gift BEFORE you officially apply for your home loan. Then, you only need a gift letter and a statement showing you have the money.
• If you have money in multiple accounts, leave it in multiple accounts for now. Your lender will have to document every deposit and every transfer, so the more you move your money, the more paperwork you’ll have to track down.

So does it sound daunting enough to stop you from wanting to buy a home? It shouldn’t! Documenting funds to close is not the nightmare some customers and lenders feel it is. The key is to be prepared to “prove it” and talk to your mortgage consultant before you move any money around.

The mortgage industry today is different than it was a few short years ago. There is no doubt about that! But if we step back and look at the changes, most are for the greater good. Added scrutiny from underwriters is helping to prevent another flood of foreclosures and it’s also helping to ensure that potential homebuyers really are ready to be homeowners. For years, people with no money, bad credit, and unstable employment history could buy a home with no money down. There weren’t enough questions being asked. Today…the questions are being asked.

As a buyer, try to remember this one bit of advice when applying for a mortgage: You’re asking for a loan of $100,000, $200,000, or more. That’s a lot of money, and your lender needs to document your file impeccably to avoid fines. If you work closely with your mortgage consultant, and work proactively to document funds to close, your home buying experience will go much more smoothly and you’ll save yourself the stress of trying to create a paper trail.

Carmen Babb is a mortgage consultant with Wells Fargo Home Mortgage

You can call her at 503-551-9690, email her at Carmen.Babb@wellsfargo.com or visit her online.  

Each business has it’s acronyms.  Real estate, I think,  has more than any other business.  I think we like speaking in code to sound important and impressive or something.

I can just see an agent with a Salem Oregon home buyer.

“Hey that’s an REO over there. It has HDW, FR, LR, DR, and DLB.”

“Great what’s the FMV and my PITI?”

The latest acronyms to permeate the real estate world are HVCC, HERA and HOEPA.    I’m a firm believer that when you think people are smarter than you, just throw out a few acronyms to show how smart you are….just kidding, for those of you that may stumble upon this post and not know that I have a very dry, sarcastic sense of humor.

Despite the fact that we now have these extra special acronyms to banty around, they do impact buyers and sellers of real estate in the Salem Oregon area.  Because we seem to be in a place where there is no such thing as too many rules, some new real estate rules have been made with regard to lending and appraisals.  I won’t go into all the details except for how it impacts you.

In the Salem Oregon area we have typically done 30 day closings.  Because of new rules and underwriters being super cautious our closings have been closer to 45 days for the past few months.  Now because of the new HERA rules, closings may take 45-60 days.  What this change does is require waiting periods in lending for various things.  Essentially time for a buyer to look over things and make sure they are comfortable with the disclosures they are being given AND they match what they were told from the get go.  What this means is that there will be delays due to these mandated time frames.

Buyers need to be aware of these mandates as do sellers.  Longer close times, means the house is off the real estate market for a much longer period of time. It is even more imperative that Salem Oregon sellers look over buyers as carefully as possible to ensure that if they are going to take the house off the market for 60 days, the buyer is really strong.   Quick and good communication is going to be even more imperative as small changes in the APR for a buyer trigger new disclosures and waiting time frames.

It is extremely important due to these rules that buyers work with lenders that have excellent communication sills. It is also imperative that buyers and sellers work with local Salem real estate agents that are on top of these new rules.  This is not the time to work with an agent that does real estate “on the side.”

If you go up to interview a Salem Oregon agent and you say “tell me about HVCC, HERA, and HOEPA, and they say “huh?”  It’s time to move on…

(that would be to me by the way…c’mon you didn’t expect at least one shameless plug in here for business?)