Odd conditions on mortgage?

Question

I’m working on a mortgage for a primary home and these stipulations seems very strange…am I being paranoid?

I sold a vehicle and paid off a credit card (2500 dollars) to improve my savings and borrowing rate, now they’re asking for the following:

1. Proof I paid off a small credit card balance with my own funds. Needs to be a full bank statement. 2. Evidence a vehicle that was sold is no longer titled in my name

Is it me or are these strange stipulations?

David M. · Answer

@Carlos Romano

Oh I see... Personally, I try not to get bent out of shape about these things. This is all part of the "red tape" in getting a loan. Remember, these people aren't necessarily paid that much and its just a "production process" to get things done. If this is a conforming loan, there are tons of regulations so sometimes they are going the extra mile, sounds silly, to comply. Its like how they have to update the file ever month or even 2weeks for new bank statements, paystubs, etc.

Its all true information and related to the loan. So, unless you can convince them that they already have proof (assuming you have the time and energy)...

Good luck.

Carlos Romano · Answer

For sure, I spent my college years working at a lender and know exactly what you mean by the cog in the process. Especially in such a regulated environment!

David M. · Answer

@Carlos Romano

Good to hear. See, just part of being a "cog in the process...."

Carlos Romano · Answer

Just an update - I pushed back on the lender and they did not need these stips and removed them from my requirements.They noted my statements for Savings and Brokerage I provided covered more than any of the stipulation related issues (payoff and sale of the vehicle). I'm going to assume this was muscle memory from underwriting when sending stipulations to the loan agent.

Loan is not fannie/freddie.

Darnell Lockett · Answer

Pretty normal @Carlos Romano.

Jamie Jones · Answer

As others have replied, this is pretty normal. It may seem redundant, but you have to realize that these loans are packaged and sold, and can be audited at any time, so having precise documentation is key to keep lenders out of trouble. For example, the reason they want the source of the funds you used to pay off credit card is so that they can verify you actually paid it with your own money and you didn't just go get another loan to pay off that one (people try to do this often), which would increase your DTI and also to flag for any potential illegal activities.

Carlos Romano · Answer

Thanks for the sanity check, all! Much appreciated!

Erik Estrada · Answer

If this is a Fannie/freddie loan, they definitely have extra red tape. It is just part of the process.

Konstantin Ginzburg · Answer

@Carlos Romano

These are not strange requirements at all. If you are working with a conventional lending institution; they will require very precise accounting criteria to be met. Many of these institutions are not providing you a loan with the intention of keeping it on their books; but are rather intending to re-sell your mortgage to a larger FHA institution. These institutions have precise requirements a mortgage must meet in order for them to be willing to purchase it from your direct lender. Since these institutions are often closely tied with the federal government; there is a level of bureaucracy that comes along with their underwriting. One of the primary numbers that is considered for these loans is your DTI (debt to income ratio). Any debt or expense you have would be factored into this calculation which includes both an unpaid vehicle balance and a credit card balance. If your DTI is too close to the DTI limit allowable, you will be asked to pay off outstanding debt in order to lower this DTI to a permissible level that will allow them to sell off your mortgage after close. Requiring you to use your own funds is also a common requirement since all funding for a deal must come from "sourced funds". These are funds that are traceable to a source. This requirement is also done for a variety of reasons ranging such as money laundering prevention.

Eliott Elias · Answer

It does not seem out of the ordinary. I’ve had lenders reach out to me for that kind of stuff after closing as well.

Odd conditions on mortgage?

Odd conditions on mortgage?

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