There’s a difference between keeping a few dollars stashed in your nightstand vs. stowing wads of cash to invest in your future home. Regardless of where you store it, “mattress money” is not a reliable resource for securing home financing. Here are a few reasons why:
- A paper trail matters. Mortgage lenders want to see a history of healthy financial management and evidence a borrower can access funds to pay the upfront loan costs (think down payment, lender fees and insurance reserves). Not only are they looking for how much is accessible, but also your ability to handle money responsibly. Showing you’re a healthy steward of your finances means better odds for favorable lending terms and pricing.
- Time is of the essence. Lenders evaluate bank accounts, and even if you have a million in cash, if they don’t see it on the bank balance sheet for at least 60 to 90 days before a loan application, it usually doesn’t count when calculating how much you have available for a home purchase and the associated fees and expenses. If you have extra cash hidden away, now is a good time to make a deposit to establish evidence of longevity.
- Integrity talks. In a time when money laundering and fraud still happen, lenders need to verify the source of your money is legitimate. No reputable lender wants to finance an illegal “shadow buyer.” If you wait to deposit a large sum of money at the final hour, lenders will need to investigate the source, which can put you at risk for a delayed or rejected closing.
- Cash isn’t always king. When it comes to paying upfront costs and down payments, banks no longer accept cash as payment. While this was an acceptable practice in the past, today banks require a wire transfer or cashier’s check for up front expenses.
- Safety first. Keeping large sums of cash in your home or a secret vault doesn’t mean it’s going to be safe. Unexpected accidents can lead to home fires, or a natural disaster may require immediate evacuation or damage to your home and belongings, taking your hard-earned money with them.
Whether your mortgage savings are currently in the bank or still in your bedroom closet, if you are ready to get started searching for your dream home, we’re here to help. Reach out today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All loans are subject to loan guidelines and approval.