Do and Don't when purchasing house / taking out mortgage

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xrw1
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Do and Don't when purchasing house / taking out mortgage

Post by xrw1 » Thu Jun 30, 2016 12:28 pm

Good afternoon everyone,

I recently met with my real estate agent about looking for my first house. The agent gave me a list of Do's and Don't while I am in the process of looking at a house. There were simple ones such as Don't open up new credit cards, Don't take out new loans and there was one that said Don't make any large purchases and it gave examples of Cars and refrigerators. Does investing in my taxable account and/or Roth IRA count a large purchases? For my Roth I usually max it out by the first few months of the year, but for my taxable account I would invest sometimes ~$1K a month and other months I invest maybe like $300.

I just want to make sure that making these investments into my taxable account or Roth IRA doesn't count as a negative when i actually try to take out the loan for my mortgage when I find a house.


Thank you for your advice!

Grt2bOutdoors
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Re: Do and Don't when purchasing house / taking out mortgage

Post by Grt2bOutdoors » Thu Jun 30, 2016 12:34 pm

Large purchase a regard to items purchases with credit - credit cards, lines of credit, etc. Large purchases made with cash do not affect your credit score.
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PaunchyPirate
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Re: Do and Don't when purchasing house / taking out mortgage

Post by PaunchyPirate » Thu Jun 30, 2016 12:35 pm

I can't imagine that would trigger any negativity. This would be normal behavior for many, many people who have incomes large enough to save. They MAY ask you to write a letter documenting what the source of that money was for the deposits, but for only $1000/month, I doubt that. If they see large deposits on bank accounts (and probably other deposit accounts), they are looking to make sure someone didn't loan you the money (and therefore requires you to pay it back... increasing your monthly expenses). But if it's your money from your income, should be no problem.

orca91
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Re: Do and Don't when purchasing house / taking out mortgage

Post by orca91 » Thu Jun 30, 2016 12:36 pm

I can't say for sure, but those amounts should be fine.

They typically want explanations for larger amounts of money being moved around... several thousands at a time. And, as long as you can show (statements) where the money went, it shouldn't be a problem.

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dm200
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Re: Do and Don't when purchasing house / taking out mortgage

Post by dm200 » Thu Jun 30, 2016 12:40 pm

Do not have (especially recent) large and unexplained changes in savings and investment accounts. You may have to explain them and, even if 100% legitimate, mortgage lenders may question where the down payment is coming from or whether there are unexplained sources of income.

xrw1
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Re: Do and Don't when purchasing house / taking out mortgage

Post by xrw1 » Thu Jun 30, 2016 1:23 pm

Looking back into my Vanguard Taxable account, I did invest $2K last month but that money was from normal work income. As for transfer of money, about 2 months ago I did transfer $6k from my checkings into savings. I usually wait until i have large amount before I make checkings to savings transfers. I assume this would be fine as I would just show them statements from both accounts.

As for deposits outside of my income, I pay for my some bills for my parents since they don't do online banking and they write me a check for what I paid. These are usually in the $500 range. Cell phone, heat, electric stuff.

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JonnyDVM
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Re: Do and Don't when purchasing house / taking out mortgage

Post by JonnyDVM » Thu Jun 30, 2016 1:32 pm

They're going to ask for all of your financial statements. As long as what goes into investment accounts matches up to your paystubs you're Ok. If you have thousands coming into your bank account from sources other than your job you're going to have to explain it. Now is not a good time to take out a loan for a car or a boat, change jobs or go on a wild credit card funded shopping spree.

They are probably going to ask about your parents bills if the money is a notable percentage of your monthly cash flow. As long as you can explain it, I can't imagine it being a problem. They should learn how to use online banking though.
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barnaclebob
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Re: Do and Don't when purchasing house / taking out mortgage

Post by barnaclebob » Thu Jun 30, 2016 1:35 pm

You will have to give a list of all of your assets such as cash, retirement, accounts, and investments. The more the better. If you buy a car it could reduce your assets to uncomfortably low levels for the banks.

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dm200
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Re: Do and Don't when purchasing house / taking out mortgage

Post by dm200 » Thu Jun 30, 2016 1:40 pm

xrw1 wrote:Looking back into my Vanguard Taxable account, I did invest $2K last month but that money was from normal work income. As for transfer of money, about 2 months ago I did transfer $6k from my checkings into savings. I usually wait until i have large amount before I make checkings to savings transfers. I assume this would be fine as I would just show them statements from both accounts.

As for deposits outside of my income, I pay for my some bills for my parents since they don't do online banking and they write me a check for what I paid. These are usually in the $500 range. Cell phone, heat, electric stuff.
These all seem quite normal and can be easily documented/explained - if any questions come up.

xrw1
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Re: Do and Don't when purchasing house / taking out mortgage

Post by xrw1 » Thu Jun 30, 2016 1:51 pm

Thank you all for your reassurance! I will just keep good documentations of bank/investment statements and the checks my parents write me. I don't have a problem explaining to the banks where my money is coming from and going to.

barnaclebob
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Re: Do and Don't when purchasing house / taking out mortgage

Post by barnaclebob » Thu Jun 30, 2016 2:02 pm

xrw1 wrote:Thank you all for your reassurance! I will just keep good documentations of bank/investment statements and the checks my parents write me. I don't have a problem explaining to the banks where my money is coming from and going to.
Yeah if your parents are writing you a large check to cover part of the down payment then you'll need to have them sign a piece of paper saying that its a gift and not a loan. Basically the bank wants to be first in line to collect money if they have to foreclose.

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