Some good news for mortgage loan applicants!

UPDATE: As of 5/27/14 FNMA (Fannie Mae) has changed the definition of a ‘large deposit’ to a deposit that is  greater than 50% of a borrower’s total monthly qualifying income, up from 25%.  This change is embraced by the lending community as positive step toward reducing the amount of paperwork sourcing required by borrowers.

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Over the past couple of years, one of the painful areas when getting a new mortgage loan revolved around required documentation for ‘large’ deposits in checking accounts.

 

Although difficult to define a ‘large’ deposit, underwriters often ask for documentation on non-payroll deposits of even as low as $600.

The reason behind the need for the paper trail on these amounts centers around the lenders requiring confirmation that monies being deposited are not borrowed funds. An underwriter does not want to see additional debt being acquired and therefore the borrower taking on a larger debt to income ratio.

The paperwork requirements around these deposits has been frustrating for borrowers who sometimes don’t have the documentation or paper trail on that $1200 personal loan Cousin Sue paid back or the $850 collected for the sale of a beat up, old clunker.

There is finally some good news on paperwork requirements that signals the first relaxing of restrictions since the housing crisis began.

Effective at the end of 2012, Fannie Mae has loosened the requirements around these large deposits.  The new rule only requires borrowers to source deposits larger than 25% of their monthly income. So for someone making $10k a month this means that any deposits under $2500 will not need to be documented with a paper trail.

This should be a time saver and headache-reducer for both borrowers and loan processors.  For a borrower it will mean less running around to chase paperwork.  For the loan processor it means a quicker processing time and reduces the need for additional paperwork requests.

This will be a welcome change for our relocation customers who often have many small checks moving in and out of their accounts for reimbursement of relocation expenses.

SIRVA Mortgage is positioned to react quickly on such lending changes.  We have already reached out to customers in process to let them know of the change.