4 Tips for Avoiding Home Finance Problems at Close of Escrow
by Debra Hamilton.
My clients and I always talk about what they can and can't do with their money while we are in the process of closing on their new home. I know this is an exciting time and if we don't talk about it, then we could possibly run into problems right before closing.
Tip 1: First, if they are receiving gift funds for part of the down payment, it either needs to be "seasoned" (in the bank account for 2+ months). The lender will ask for 2 months bank statements at least. If the money is not seasoned, the lender will ask for a letter from the person gifting the funds as well as their bank statements proving they had the money to give in the first place. This is true for homes for sale in Seattle, or anywhere else.
Tip 2: If the down payment is coming from a VIP Account, 401K Account, or some other retirement/investment/savings account, we need to have some lead time for that process to take place and the money to be available - so we talk about it to ensure we have enough time for them to get the money for their down payment and closing.
Tip 3: Next, we talk about NOT buying anything over a couple hundred dollars or apply for any credit (except the loan to buy the home) until After we are closed. Their lender will pull their credit at the start of the loan process and most times AGAIN right before closing. They might even ask for another bank statement to make sure they haven't spent too much money or applied for any new credit which might make their debt to income ratios different than when we started.
Tip 4: A new issue I just ran into this past month is - don't move money from one account to another. Every time my client moved money from his investment account to his checking account, a new letter of explanation had to be given. He was nervous about having enough money in checking when we closed, but his lender and I had to tell him, "Don't move any money!" It actually delayed our closing a few days - something you don't want to do.
If we tackle these tricky issues up front then we don't have any surprises at closing and less bumps along the way.
A strong negotiator with outstanding customer service skills, Debra Hamilton guides clients through home and investment property purchase transactions in the Seattle real estate market.