‘Barber shop talk’ is always interesting to listen in on. You have a lot of people espousing how much they know about a particular topic, but in the end, a lot of it is just plain bad information. For instance, there are some people who have absolutely had their heads in the sand regarding the new requirements to obtain financing for real estate. Some of them think that a high credit score and a “good job” are sufficient to get one to the finish line……with 100% financing!! Sad to say they are dead wrong.
Nowadays, there is no 100% financing. To be quite honest, except for some rare cases, there is barely any 90% financing available, except for the creme de la creme. As the title of this article suggests, cash is definitely king, as the ones most likely to get deals done, are those who can show cash balances that are 20-30% of the total value of a property (in the case of a refinance) or 20-30% the total amount needed to make a purchase (in the case of an acquisition). However, the paper trail requirements of this cash can be very tricky.
Gone are the days where you could bring in funds on the last day and no one would question it. It is common place, in fact, I have come to expect, that the lending institution providing the financing will track the funds back to the actual account used to verify that the owner of the funds is the same name on the loan application and/or personal financial statement of the borrowing entity/individual in question. Another potential landmine is not using the same account for the down payment of final funds that was used for qualifying and underwriting. You can have your deal go up in smoke and be outright canceled due to a last-minute bank account switch. Case in point, I was one day away from funding a deal for a client and he had a wire sent in to close escrow from an account that was not disclosed on the loan application. The funder of my transaction completely refused to fund my client’s loan because the account number for the wire didn’t match the account number used for qualification purposes. Mounds of paper had to dug up to show that the account numbers were switched over during a post-merger integration of accounts between two banks. The client was livid, and the lender just shrugged its shoulders absolving that it was the client’s fault. Even though my client was putting 25% down to close the deal, the lender did not care. They wanted their paper trail or no funds.
So lesson learned……..in the new day and age of increased regulation and documentation, be consistent with your accounts used for qualification and for final fundings. The headaches just aren’t worth it.