With the long election season finally behind us and the holidays still a few weeks away, what better time than now to devise your plan to buy or sell your house? With interest rates hovering at historical lows, many potential home buyers are getting serious about taking those first steps -- for most of us, that includes applying for a mortgage.
One of the questions I frequently hear from first-time buyers hoping to qualify for a loan is, "Can I use 'mattress money' to help with my down-payment?" While it might not literally be stashed under your mattress, this type of cash falls under the catchall term describing any money saved without a documented paper trail. The cash could come from selling a car, a generous birthday or wedding gift or even a small inheritance.
You might assume that cash is cash, but when it comes to real estate transactions, it's not quite that simple. In order to be able to use your mattress money to qualify for a mortgage, these funds need to be deposited in a bank account for 60 - 90 days prior to applying for your loan. This is referred to in the lending industry as "seasoning the funds."
When it comes to getting mortgage approval, the way you save your cash is nearly as important as having it in the first place. Lenders will need to see proof that you'll be able to cover the upfront costs associated with your loan such as the down-payment, closing fees/charges and in some cases, cash reserves for your property taxes and insurance. Be prepared to provide the two most recent copies of your bank statements, and if your savings are short by $5,000, be sure to deposit your mattress money immediately to ensure loan pre-approval.
Many buyers innocently believe that as long as they bring the required cash to the closing table, why should lenders care where it comes from in order to approve their loan? To protect the integrity of their mortgages, reputable lenders must be able to verify the source of your cash to prevent money laundering and illegal "shadow buyers."
So if you're ready to take this first step, it may be wise to look under your mattress or crack open that piggy bank now and take those funds to the bank. You'll be happy that you did when your mortgage is approved!
Enjoy the blessing of friends, family and food this Thanksgiving and remember...there's no place like home!
Ginger