Since the major changes that hit the mortgage world in the beginning of 2008, it has become very documentation intensive to get approved for a home loan. So it’s a good practice to have a clear understanding of all the documentation you will need to close your loan smoothly and on time. This article is going to detail the items you will need to document the source of your down payment, gift funds if you are receiving them, and lastly clear documentation of your earnest money deposit. These items sound minor, but you wouldn’t believe the problems and frustrations that can arise with a loan closing when these items are not in order.
Documenting the Down Payment with a FHA Loan
FHA requires the FHA borrower have a minimum of 3.5% of the purchase price as a down payment. It must be fully documented from where the FHA borrower is withdrawing the 3.5% down payment. This is most commonly accomplished with two months bank statements, all pages that show the FHA borrower has the funds and has had them for two months. There are other ways to document the source of the funds such as retirement accounts, brokerage accounts or selling an item such as a vehicle to raise the cash for the down payment. If the underwriter sees any large deposits in the two months of bank statements supplied, you must explain and source those large deposits.
Documenting Gift Funds Received for a FHA down Payment
A nice thing about FHA Loans is that you are allowed to receive a gift for all of the 3.5% down payment (or more) from a relative, lifelong friend of the family or your employer. You document completing a gift letter supplied to you by your lender, providing a bank statement from the gift donor showing their ability to gift, documenting the gift funds being withdrawn from the donors account and finally documenting the gift funds being deposited into your account.
Documenting the Earnest Money Deposit
When you purchase a property in most cases you will give an earnest money deposit held at the escrow company to show the seller you are serious in purchasing the property for sale. Generally you will write a check to the escrow company handling the sale. The FHA lender will need a copy of the canceled check front and back and also proof the check cleared your account by it showing up on your bank statements.
I hope this article will make your more prepared to buy your new house with an FHA Loan and have a smooth closings.
If you have any questions or would like to be pre-approved for a FHA home loan, please don’t hesitate to call me at 858-922-7899 or email me at homeloan8@gmail.com
Warm Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
When you purchase a house with a VA Loan, you will of course need to have the house appraised by an VA appraiser prior to having the loan funded and closing. The number one reason for the appraisal is so the VA lender can be sure the value of the property. But in additional to the home’s value, the VA appraiser may note small items that will need to be fixed prior to the lender funding your loan. If any items are noted, these items will need to be fixed and the appraiser will go out to re-inspect to verify the items have been fixed before the lender funds the VA loan. Generally VA appraisers are looking for “health & safety” issues. VA wants the home be free of health and safety issues before the VA borrower moves in.
Below is a list of some of the more common items the VA Loan appraiser could ask for to be fixed:
- All utilities (power, gas, water) will need to be on at the time of inspection and it working order
- If there is chipping or pealing paints on houses built prior to 1978, the appraiser will ask just those spots to be re-painted. This is usually a really small and easy thing to fix.
- Crawl space free of debris and moisture
- The house must have a working heat source
- Strapped and raised hot water heater
- The house must have hot water Working plumbing (bathrooms, etc…)
- Safety of the property (broken windows need to be fixed, if property has security bars they must have quick releases, etc…)
- Working smoke detectors
- Photo’s will be taken of the front, back, sides and at least 3 interior photo’s
So those are some of the more common items needed to be fixed that could pop up in a VA appraisal. When you are out looking at properties to buy, keep an eye out for these items and realize that the appraiser may ask for them to be fixed.
Remember, to complete your VA Loan, you will need a termite clearance report. This means if the seller has a termite inspection, all the section 1 and 2 items noted in the report must be fixed and the termite inspector must provide a clearance in writing before the VA lender will fund the loan.
If you have any questions or would like to be pre-approved for a VA home loan, please don’t hesitate to call me at 858-922-7899 or email me at homeloan8@gmail.com
Warm Regards,
Rob Chomentowski Sr. Loan Officer (and VA specialist)
858-922-7899 direct
When you purchase a house with a FHA Loan as your financing, you will of course need to have the house appraised by an FHA roster appraiser prior to having the loan funded and closing. Of course the primary reason for the appraisal is so the lender can be sure the value of the property. But in additional to the home’s value, the FHA appraiser may note small items that will need to be fixed prior to the lender funding your loan. If items are noted, these items will need to be fixed and the appraiser will go out to re-inspect to verify the items have been fixed before the lender funds the FHA loan.
Generally FHA appraisers are looking for “health & safety” issues. FHA wants the home be free of health and safety issues before the FHA borrower moves in. Below is a list of some of the more common items the appraiser could ask for to be fixed:
- All utilities (power, gas, water) will need to be on at the time of inspection and it working order
- If there is chipping or pealing paints on houses built prior to 1978, the appraiser will ask just those spots to be re-painted. This is usually a really small and easy thing to fix.
- Crawl space free of debris and moisture
- The house must have a working heat source
- Strapped and raised hot water heater and the house must have hot water
- Working plumbing (bathrooms, etc…)
- Safety of the property (broken windows need to be fixed, if property has security bars they must have quick releases, etc…)
- Working smoke detectors
- Photo’s will be taken of the front, back, sides and at least 3 interior photo’s
So those are some of the more common items needed to be fixed that could pop up in a FHA appraisal. When you are out looking at properties to buy, keep an eye out for these items and realize that the appraiser may ask for them to be fixed.
Remember, to complete your FHA Loan, you will not need a termite clearance report unless you asked for a termite report in your initial purchase contract.
If you have any questions or would like to be pre-approved for a FHA home loan, please don’t hesitate to call me at 858-922-7899 or email me at homeloan8@gmail.com
Warm Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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