Buying A Home
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
How far back for bank records?
I thought it was 2-3 months when we bought the first time, but not sure what it currently is? Just wondering b/c DH is going to get a big disbursement from his biz, but want to make sure it's in there long enough before starting the whole buying process. I know I could just ask our broker, but I kind of don't feel like opening up dialogue right now until we're ready.
DS born via c/s 11/08 and med-free GD VBAC DD 3/11!
Re: How far back for bank records?
Does "his biz" mean your DH is self employed?
The rules for approval for self-employed people are different than FTEs who work for a company; they're stricter and require more documentation since lenders see owning your own business as risk.
Others on here can tell you for sure, but if I remember correctly, they want to see something like 2 years of steady money coming in to verify the income amount. This is because so many small businesses fail in the first year and income can be variable at best. They also want to make sure you're not fudging the numbers in order to be approved for more money.
The lender really does not need to see your business accounts. I hope that you are not planning on using your business bank accounts as down payment.
Sounds like your husband files an 1120... so you will need two years of returns, your K1's, and W2s. If your husband is 50/50 with a partner, he will be able to qualify with 50% of the business income, and whatever he has on W2's and K1's.
Any large deposits into your personal account HAVE to be sourced, and have a paper trail. If you can't source it, you can't use it.
Self employed borrowers are not scrutinized as what everyone makes it out to be. As long as you can verify that you have a legit business via business license, secretary of state, P&L, and don't write everything off, its not that bad.
Thanks, Jen!
I did get some answers from our broker and since she deals with a lot of business owners in our area, I feel pretty comfortable with her info. She said the same thing as you about the two years of records, which we already knew. She did say that some people just take directly from the business for their down payment, but need a letter from their CPA stating that it doesn't adversely affect the business. It doesn't need to be in the account for 6 months. We have our own money, but DH was going to get a big chunk via disbursement and we'd use that too. This is not uncommon in a corporation and he gets several disbursements a year out of the profit and they leave a certain percentage in that account for investments as well.
So basically, it doesn't need to be seasoned for 6 months, but you definitely need documentation that it doesn't adversely affect the business. I can see where we wouldn't have been able to take any money from my old business since we weren't profitable and I was a much smaller company.
If you are taking 1/5 of what they keep in their total profits, and this is a 50/50 partnership, he is using 40% of his vested interest in the company. Does that make sense? If it were me, and I am a processor so it is my job to get this information from the borrower based on what the UW is requesting, I would want a letter from the other partner allowing you to use these funds. It mostly depends on how far off your loan is from going into underwriting. You will need two months of personal bank statements if you move the funds into your personal account. If that deposit shows up on your statement, you have to source where it came from. If the funds are seasoned in your account, then you will not.
Are you going to use your personal account for your earnest money?
Actually... now that I think about it, what will the other partner be doing with his share of the dispersement?
Yep, we'd be using our own money for earnest money, money to bring to the table to sell our place and realistically the majority of the down payment. The rest of the money from the biz is for partial down payment, but I guess we could just use it to pay to get out of our place if that's less of a mess with paperwork. Hmm, didn't think about that part. Do you need to show documentation on the money that you bring to the table to pay off the balance to your existing mortgage?
DH's partner is the one that handles the books and is the conservative, detail-oriented guy like me!
Not sure what he does with his disbursements, but they get them regularly. I know he's not buying a house since his girlfriend refuses to do so until they are married and they aren't even engaged. 