I am getting a gift for my down payment, what documentation do I need to provide?

It depends on the loan type. For FHA you must provide an account statement from the person giving you the gift verifying they have the funds to provide, proof the funds have come from the account the donor provided, proof the funds have cleared into your account and standard form gift letter. For most other loan types you must provide proof that the donor gave you the funds, proof the funds have cleared into your account and a standard form gift letter. It is acceptable to send the gift funds directly to the title company as well, which then requires documentation that the title company has received the funds either prior to or at closing.

Who can give me a gift?

It depends on the loan type (FHA, conventional, jumbo etc), however in general a gift can come from a relative, fiancé/fiancée/domestic partner, an approved nonprofit institution, an approved government agency, or your work. A relative is defined as a spouse, child or dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship. A domestic partner is an unrelated individual who shares a committed relationship with the primary wage earner, currently resides in the same household as the primary wage earner, and intends to occupy the security property with the primary wage earner.

What does “cash to close” mean?

This is the amount of money that you need to have when you close your mortgage. This includes your down payment, closing costs, prepaid property taxes and insurance, interim interest and any tax/hoa/assessment pro-rations.

How do I get the cash to close to the title company?

Almost all title companies will require you to wire your funds to them. This involves you going into you bank in person. Certified checks are no longer a trusted form of payment due to the large increase of fraud. If your bank is not local you may need to plan ahead in order to get your funds to the title company

What does the title company do?

The title company has several roles in your mortgage. First and foremost they ensure that your property has clean title, meaning your home is free and clear of any 3rd party liens or encumbrances that could affect your legal ownership. They will also insure this clear title with title insurance. The other important function they perform is to serve as the closing agent for your loan. They conduct the closing, ensure all documents are signed properly, notarize document, record documents in public records, disburse funds to the applicable parties per the terms of the closing and coordinate the survey.

What does LTV mean?

LTV is an acronym for Loan to Value. This is the value of your loan expressed as a percentage of the value of your home. For example if your loan amount I $160,000 and your value is $200,000, your LTV is 80%

What does DTI mean?

DTI is an acronym for Debt to Income ratio. This is the amount of your monthly debts expressed as a percentage of your gross monthly qualifying income. For example if your monthly debts are $2,000, and your gross monthly income is $5,000, then your debt to income is 40%.

Can I order my own appraisal?

Sure, but we cannot use it for the underwriting of your mortgage. So you just wasted your money. Appraisals must be ordered in compliance with the Appraiser Independence Requirements (AIR) of the Dodd-Frank Wall Street Reform Act. This means that the appraisal must be ordered through an independent 3rd party, called an Appraisal Management Company (AMC) in order to keep a separation from interested parties and the appraiser. The appraiser must also be free of “undue influence”, such being asked or required to appraise a home at a particular value. The purpose of this legislation is to prevent appraisal fraud, which was a contributing factor the Great Recession and mortgage crisis.

What is a survey?

A survey is a visual representation of the legal boundaries of your property, complete with outlines of your home’s structure, fences, easements, paved areas and additional structures such as pools, sheds, paved areas and screens.

Am I a First Time Home Buyer?

Have you owned a home in the last 3 years? If the answer is no, they you ARE a first time home buyer. Confusing, yes, and somewhat an inaccurate term, however the definition of a first time home buyer is one that has not owned a home in the last 3 years. For example if today is 8/3/2017 and you last owned a home on 8/2/2014 then you are a first time home buyer. This includes a primary home that you owned jointly with your spouse, even if you were not on title, deed or the mortgage.

What is a Jumbo loan?

A jumbo loan is a mortgage where the loan amount is above a certain dollar amount. This is called the “conforming loan limit”. Currently the conforming loan limit is 424,100, however there are some “high cost areas” of the country that have expanded loan limits due to the median price of the homes in the area.

My mortgage has been approved, can I go make some purchases?

Only if you want to jeopardize your mortgage! All mortgages have an “LQI” or Loan Quality Initiative, which is pre-closing audit on your mortgage. It includes a credit refresh that reveals any new credit accounts opened and any inquiries to your credit by a creditor. If these show up, you will be required to explain and document any new obligations, and this could affect your DTI and ultimately prevent you from qualifying for your mortgage.

Do you have a question? Ask it here and we will answer it directly and post it on our FAQ for future clients’ knowledge.