I'm in the process of getting a loan for an investment property in my wife's name. I put it solely in her name because I thought it would be easier since she has a good paying job and all the other property debts are in my name. We're getting ready to close and they've asked where the down payment is coming from. I was going to pull it from my real estate account that I got before we were married and never put my wife's name on the account. I was getting it from there because our joint account doesn't have enough in it. Well, we a few days out from closing and the bank has told me that I can't "gift" my wife funds for a down payment on an investment property. I asked if I could just "loan" it to her on a promissory note and they said you also can't use unsecured loans as a down payment.
So.... I feel kinda stuck at the moment. We've got the money, but no real way to use it that will satisfy the banks conditions. Anyone have any advice or can point to any rules that would say otherwise?
No good answers. Standard issue is for the bank to verify cash to close funds (way before this late date).....if the funds have been in a bank account for at least two monthly statements, they don’t ask where it came from. They are correct that she can’t use gift or borrowed funds for the down payment on an investment property.
Simplest may be to add her to your RE account...whether they still want to see her name on the account for two statements or not is a question I would ask. I've done exactly this and made sure both our names are listed on accounts, and then generally they will ask for a simple letter stating that she is free to use those funds for her sole benefit and this isn't a loan (something like that). Maybe doing it even now will be sufficient to address the issue.
I was thinking the same thing as @Matt Devincenzo to just add her to the account. The only problem I see with that is the underwriter would have already asked for last two months bank statements from all her accounts. This account suddenly shows up and it raises questions. I would just explain that you thought she had been added to the account already after marriage. Show proof she has been added. Of course there is risk that when you share two months bank statements, it raises new questions when they see income and expenses from that account.
I am curious how it got this far without the question being raised? She must have sent account information already, so there must have been ample money in those accounts. Can you pull money from her accounts and just replenish it from your account? I don't see how the underwriter would approve the loan without her showing money. Maybe it was in investment accounts, so you may need to cash something out.
In general I don't think splitting finances as a married couple is useful. If she is qualified, having you on the loan shouldn't affect approval.
I would find another lender at this point. There are alternative lenders that can assist but your terms will more than likely not be as nice, such as a higher rate.