How using Cash can crash a mortgage deal.

In this episode we discuss the importance of sourcing funds in a mortgage transaction and what it means to "sourcing funds".  We dive into the pitfall of using cash specifically related to the mortgage process and the challenges it creates.  

Jeff Cunningham is a REALTOR (license # 301547) with United Realty Group (Broker license C34827) serving the Triad NC area.
Jeff can be reached at
Email -  jeff.cunninghamrealtor@gmail.com,
website, jeffcunningham.mysalecore.com,
Facebook,- https://www.facebook.com/jeffcunninghambroker/

Gina Milloway is the Mortgage Loan originator NMLS #1676070 & CEO of Triad Mortgage LLC, NMLS # 2385260,   
Gina can be reached at,
Email:  gmilloway@traidmortgagellc.com
Web: https: https://www.ginamillowayloans.com/
Facebook - https://www.facebook.com/mortgageswithgina/
Office -336-290-1891

NMLS Consumer Access:  https://nmlsconsumeraccess.org/
Privacy Policy:  https://www.ginamillowayloans.com/privacy-policy
Triad Mortgage is an equal housing lender 

Transcript

0:02

Hello and welcome to Let's Get Moving With Jeff and Gina. I am Gina Millway, your local mortgage advisor, and this is, I am Jeff Cunningham. I am your local real estate agent here in Greensboro, North Carolina. Part of the triad. It's about to get interesting this weekend. We're getting, uh, some remnants of a Ian and uh Oh, absolutely. I think outdoor activities are gonna be limited if not eliminated this weekend. Yeah. Unless you like to be wet and play in the rain. Exactly. Which I mean, you know, could be fun. So, mm-hmm. you know, I've seen those, those videos of people having hurricane parties where they go outside and try to win to serve. Yes, absolutely. Yes. That makes for, well, let's, let's hope that we don't get, uh, that kind of activity. It is. We are supposed to get, supposed to get a lot of rain here in the central part of North Carolina this weekend. Yeah. And, um, and yeah, I just, you know, part of, uh, well just part of, part of the hurricane season here and living in the south, the hurricane season. That's right. And Florida right now as we're recordings, probably getting pretty hard right. Right about this time, I believe it was May a category five. It was as it was coming ashore. Yeah. Which is, which is a pretty intense storm, even for Florida in an area that gets it on a regular basis. So I hope everyone down there stays safe and evacuated if they needed to. Indeed, indeed. And yes, uh, the roads are, roads are crazy down there. But, um, yes, I spoke with my, my aunt who's in, uh, the villages down there, um, my aunt, my uncle, and, um, and yeah, they're battening down the hatches. They've, uh, they're, they're pretty much, uh, restricting movement for people. Um, again, safety reasons, but, um, but yeah, uh, villages is a huge community down. And, um, right, right in the central part of Florida. And, uh, and yeah, they're, uh, yeah, the diners and the grocery stores are jamming right now down there. So, yeah. Um, you know, all good thoughts and prayers go out to these guys this weekend. Yeah, it, it's, it's scary. It's terrifying. I lived in Florida for a while and the good thing about Florida is they get beat up so much about hurricanes that a lot of buildings will, will stand it, a lot of the powers underground. So, um, if it had hit a different area, wouldn't be the story, you know, as we've seen in other cases. So, Hopefully it'll be minimized, but it's still, it's still a pretty intense storm, so Yeah. Yeah, it is. And uh, and then yes, so, so it's supposed to go through Florida, then wrap right back around the other side, East Coast and then, uh, and then come up and visit us there, like you were saying. Um, Friday, Saturday, Sunday this weekend. So, Yeah, so Rain Weekend time to get some cleaning done inside That's right. Get some cleaning done. We will definitely be inside watching some Netflix or probably renovating the house, so, Yeah. Yes. And maybe all the football games will not be canceled and uh, and we'll be able to get some of that in there as well. Mm-hmm. Mm-hmm. Yeah, boys. He might have to be productive this weekend. Well, yes. Uh, you know, unfortunately, you know, I'd have to say most of my showings will be canceled, um, just for that reason, you know, Um, number one, yeah, the weather's gonna be terrible to be out and about, but number two, yeah. The sellers are gonna be like, Geez, I, you know, please take your shoes off. Take your socks off. Yeah. You know, take everything off if you can, cuz uh, you know, we just don't want you in the house with all this mud and water, so. Mm-hmm. I have seen open houses where, But I've been to one specifically that I remember where there was literally probably six inches of water standing in the front yard and there were still people just in and outta the house trying to make offers. I was crazy. Yeah. Yep. Well, yeah, this, uh, last couple years we've seen just about everything. So Yeah. Yes. Uh, you know, before that we would certainly say, Hey, Wipe your feet off, Put on your little booties, put on, you know, let's, let's be respectful. Yeah. It's mad Dad. Absolutely. Yeah. We'll be swinging back that way, you know, in due time. Um, you know, but right now, uh, you know, we're still hot and heavy over here. Um, yeah. I mean, even with Jerome Powell's best efforts to. Good luck. Throw, throw a couple of curve balls at us. Oh yeah. They're trying, but I don't know. Mm-hmm. So we'll see what happens. Yep. We'll see. Um, it's, it's been interesting with, with rates we've had, You know, I don't wanna spend a whole lot of time on this because it may be a little depressing or shocking, but um, for, you know, check on your loan officer friends. We're not Okay out there right now, so, um, Yeah. Yeah. It's, it's, it's shocking is really what it is. It's shocking and I'm not gonna say the rates are good about, it's just shocking. Considered where we've been with rates in the twos and threes, and now here we are with rates in the sevens. The rates are in the sevens in some cases. Right. And in the month of, I believe I saw, um, I saw some information put out. I think it was very habi, but the information was in the month of September. The overall number drop that we've had in basis points, which is how we kind of measure, um, the mortgage bonds we've had over a 400 basis point drop. Hmm, that's about two full percentage points, but that drop has been in September. that September, 2022. Yes. Well, so, so, so, so we, again, don't get folks a little too confused. So these basis point drops are again, uh, what the interest rates counter to correct. So the interest rate would go up once our basis points go down. It's not, it's not a mirroring effect. Right, right, right, right. It's a worsening, That's a better way to put it. It's a, it's a worsening. Do you have the mortgage bonds? Um mm-hmm. worsening and, and, well, we consider dropping, um, but it is a worsening. Sure. So as the mortgage bonds drop or worsen Yes. Do go up in response to that. Yes, absolutely. So, Gotcha, gotcha. Yep, yep. So, and then we had, I mean, just this last week and one day we had 170. Uh, basis points drop, which was almost a full percentage point in that day, which is the most that I've seen. Wow. Wow. I, it, it's a huge number. That's a huge number for one day. And we've had some bounce back, so I mean, it, it's better today. Um, but it's still, we're still down a lot, so hopefully we can get that back. I don't know. Yeah. Well, just the economical economic environment, you know, again, that we spoke about a little earlier. Um, you know, it's, it's. It's just a volatile time and, and, and mm-hmm. and historical time, I should say. Yeah. Uh, with the US economy, Um, yeah. The US and global. I mean, it's, Yeah. Yeah. Which is, you know, playing a big part in our economy as well as the global Sure. The global economy, which I guess it does on a regular basis, but there's so many things going on out there that are just countering each other and causing. volatility. Yes. But yes. Housing the fun It is, it is keeping us busy, but, Right. Let's, uh, so let's talk a little bit about some of those aspects that may be a bit concerning mm-hmm. um, in, in a better environment or in a worse environment. Um, yeah, absolutely. And we're speaking today about cash. Yes. Um, and, and how to use cash in our transactions. Um, and we're not talking about a total cash transaction where we're buying a home or an investment with cash, but we're talking about today with, um, you know, deposits, um, and managing your bank accounts in a way that, uh, that an underwriter is going to see. And, um, and what we're gonna talk about, I guess today is a, is a couple of red flags and, and possibly how to avoid a couple of those. Yes. And I like the way that you use the word manage because it really is about managing it. Mm-hmm. it's not that you, you can't use the cash. It's about managing how you do it. Yeah. And that's what really, really, really important here. And you know, as much information is out there and as hard as we try to educate borrowers, it still happens. Someone will try to use cash as. You know, for their down payment or you know, for some part of the transaction. And it really, really causes mm-hmm. a big issue. Yeah. It really can cause a big issue. And we're gonna talk a lot about, you know, why the different types of cash deposits, you know, that I've seen maybe a few different scenarios and what's happened and staying out of the gray area when we come to Mm-hmm. underwriting. Exactly. Underwriting your mortgage. You don't wanna be in the gray area. And what I mean by that, So the gray area is something that calls for the underwriter's discretion or the underwriter to make a call on it, whether that call is good or bad. And that just basical basically puts their antennas up to say, mm-hmm Hey, we need to go take a look at this and well, a gray areas give them the ability to make the call on something to decide if we can use it or we can't. That means there's not a guide, there's not a specific guideline that covers your specific scenario maybe, and that they have to make the call. And what you have to understand is that underwriters are judged on their, their loan performances. And there's a lot of people looking for jobs right now. And so underwriters are gonna be careful. Yes. And, and they wanna maintain their job security. And, and I think everybody can understand that if you look at it from that point of view, that the underwriter's really trying to maintain their, they're trying to keep their job. Sure. And as well as the integrity of the loan, you know, again, for the investors involved. Um, but yes, uh, their, their performance is very tied into their employment. Yeah. So let's talk about. Let's talk about funds. So I don't wanna make this a cash, I wanna make it like a, like a funds discussion, because you can screw up in other ways too. Okay. And one of the, the things that I have, have actually seen or come across, had the questions of it recently is your, your deposits on your contract. Mm-hmm. one. Your deposits. Thankfully we can't use it at least here, not North Carolina. It has to be a, you know, a check or a money order. Mm-hmm. So thankfully your due diligence and your honors money can't be cash anyway. However, what I have seen happen is, Let's say, you know, Bobby is buying a home, and Bobby's mom was like, Oh, I'll just run down and pay it because you can't make it to the attorney's office. I'll give them the deposit check. I'll just write it out of my account. No. Mm-hmm. no. Stop. Right? Do not. Mm-hmm. do not do that. The funds need to be your funds. Mm-hmm. absolutely. If mom is not on the loan, do not use mom's funds. Mm. If your wife is not on the loan, don't use your wife's funds unless both names are on that account. Absolutely. Did you know that funds from a spouse is considered a gift? Ooh, no. I did not explain, yes. If, if the borrower's name is not on the spouse's bank account, so like if Bobby's getting a loan mm-hmm. and Susie has her own bank account and Bobby's named not on the bank account. Mm-hmm. she gives him money. It's a gift. Yeah. If, if mom writes that due diligence check out of her account, it's a gift. Mm-hmm. Mm-hmm. that we then need have to see mom's, uh, banking account. We're gonna need two months of Mom's bank account. Correct. Correct. So, so, absolutely. So, so So we wanna make sure that folks. at the time of transaction. Uh, meaning once we get a contract written or we're writing a contract again, we need to verify or at least ask our clients to verify again, their funds and where they are in that and where it sits today. Yes. And, and, and again. Those that are involved with the transaction, um, need to be, you know, again, making those deposits. Mm-hmm. And those that are not involved with the transaction need not to make these deposits. Right. And we try as loan officers, at least, at least I do, I'm reviewing bank statements mm-hmm. Going into pre-approval. I don't, I don't give a pre-approval unless I look at the bank statement. And so we try really hard to. Scan, almost underwrite the loan ahead of time. Mm-hmm. we're looking to see what's in that account. Is there something that's gonna show up that might be an issue? And particularly, one thing I'm looking for is a, is a large deposit or a cash deposit. Mm-hmm. And, but I can tell you people sneak it in they will find a way to sneak it in. No matter how much you go through it with'em, no matter how much you tell'em, don't. Yes. People will find a way to sneak it in and you, it causes an issue. And it causes an issue all the time. Yes. Um, so, um, a couple of those instances, I know that you and I have covered this a couple of times, but just like you said, you know, if, if Bobby's mom wants to run down there and drop off that earnest money check for just say a thousand dollars and she's not part of. Transaction. Then again, we usually don't find this out until about a week before we close, so that we're already past due diligence in most cases. Mm-hmm. and, and, and we are in a mortgage transaction. We're not buying straight out with cash. Um, but at the same time, where we're going, uh, with this is just the fact that this, uh, money, um, for all parties needs to. What we talked about earlier is traceable is traceable and sourced. Yes, source and source is the key word in the mortgage industry. But yes, source means traceable and, and there's, that's loaded. So it can mean a lot of different things and different scenarios. And I wanna back up just one second before I go down this horse and we'll rabbit hole. Cause I can be there for, Yeah. The reason that it could be an issue if, let's say somebody else on the loan writes that money or uses their funds is one, yes, we do have to include it as a gift, and that's not always a bad thing, but it could be. Mm-hmm. a gift on a loan if you don't already have that on the profile. A gift on a loan is considered an additional risk layer on the. So what is basically telling our, our, um, ai, our underwriting system, is that you are not using all of your own funds. Mm-hmm. you're having to get funds from somebody else to make this transaction happen. Mm-hmm. So it's an added risk layer to your file. Well, maybe you're already maxed out on your added risk layers. You add that gift and now you go from having an approve or a doable loan mm-hmm. to one that's not approv. Right. And that can make a huge, huge, huge difference. I mean, you go from being okay to, to not being okay. Mm-hmm. so then we've gotta figure that out. The other thing where it comes back to is mom wanting to provide her bank statements or whoever's gifting you the, the funds. Mm-hmm. People don't like to give out their bank statements. Correct. They don't want their kids having their bank statements. I mean, shoot, some wives don't even want their husbands having their bank statements and vice versa. Right. People get weird about that kind of stuff, their financial information, and I get it. I completely understand it. Mm-hmm. but. Just because you don't wanna give it out doesn't mean that I, I still don't have to have it. Right? Yes, yes. I still gotta have it. If you offer up a thousand dollars of your money to, to help them buy a home, you've gotta show me where the funds come from. Mm-hmm. So once you gotta overcome the hurdle of that donor being okay with giving up their bank statements. Right. And two, what have they done? How does their, how does their bank statement. Do they have some big deposits, some cash deposits? We're gonna have to run down this huge rabbit hole of chasing that money when if it had just been done correctly in the first place, we wouldn't be in this scenario. So that's what we're trying to avoid with this. Mm-hmm. this little message, it's like, just, just stop. Don't, don't add the extra hurdles. Right. Talk to your loan officer. and, and make sure that you're doing it the way it's supposed to be done, because it can be a big deal and it doesn't, you know, like you don't think about it being a big deal. Right. You know, but it is. Yes. Yes. And, and, and we've had some changes here in the last, uh, last period of time. Uh, Patriot Act being one of those mm-hmm. uh, coming just after nine 11, um mm-hmm. And again, that's just, uh, keeping an eye out, you know, And the public funds, you know, your bank accounts, not to say that they're public. Yeah. But, you know, if the government can get ahold of that and or they're, they're regulating the bank accounts mm-hmm. then those are the ones that are gonna be asking, or at least have their eyes on. on certain deposits. Um, Right. Yeah. And, and if they question those, you know, again, that's, that's great that again, we understand by using a bank, we're, we're, we're under the bank's guidelines. Yeah. The banks are required to deposit anything over 10,000 to the government. Right. And, and that's been around for a while as part of the Bake Make Secrecy Act and also the, um, Patriot Act that was passed, so especially after nine 11. So they're trying to avoid money laundering and. Oh, what's the word I'm looking for? Terrorist Activity Funding. Yeah. Type thing. Fund funding. Illegal activity. Right, exactly. So the banks are reporting any depo cash. Cash deposits, specifically over 10 grand, so mm-hmm. Um, but as far as the mortgage goes, really the, the biggest culprit that we have for sourcing funds comes around cash. Yes. It has to be proven. It has to be. Gotcha. All right. So now that we've, uh, ruffled a few feathers and maybe, maybe a few made a few people nervous here. What is the best way to handle, um, say a cash transaction if, um, uh, you know, um, Bobby and Susie, I think of the names you were using earlier. Say, Hey, we're about ready to go look for a new. And grandma says, Absolutely, I'd love to help you with that. Um, you know, I've got$5,000 set aside that I wanted to put in your, um, account, however you wanted to do that. How would somebody manage, um, a deposit or a gift prior to, um, their beginning, their mortgage journey, which again, looking for a. And there's two, there's two different things there, and they, there's two different, um, scenarios around it. Two different procedures. One is cash and the other is the gift. Mm-hmm. Now, if the gift is a cash, then it kind of all falls under the, the cash thing. So, mm-hmm. let's start with, let's start with why this is important or what's gonna happen. So, When you do a loan, you give bank statements typically, cuz you have to bring money to the closing table. You're gonna need bank statements. Mm-hmm. And so the underwriter's gonna look for those bank statements and they're gonna look for anything that's classified as a large deposit. Mm-hmm. Now most of the issues with large deposits come around cash because we have to be able to find the source of the cash. Mm-hmm. Now large deposits such as checks, irs, you know, tax returns, things like that typically have a source. They're not as difficult. Cash can be. Cash can be a deal killer, and that's why I specifically wanted to talk today. Cash can be a deal killer because it's hard to source it. It's not impossible. There are exceptions and there's different rules around it, so, a large deposit. Specifically speaking about cash is it's gonna be a deposit that's over a certain amount, and it's different per the loan guidelines. Like for instance, in VA's Fresh, in my mind, I believe VA's is 2% of the loan amount. Okay? So if you have a loan of, um, 2%, let's see. If you have a loan of a hundred thousand mm-hmm. and you have a deposit, 3000, well, that's over 2% of a hundred thousand, which is two grand. Sure. 3000 would be considered a large deposit. We're gonna need to source it. Where did this cash come from? Mm-hmm. Your mattress is not a, is not a good source. can't use it. Keep all my money, right? No, you can't. You can't do, No it, it's not okay. Can't use that. Right. The bad part about it is if we have to back those funds out, let's say we can't source it and we have to back those funds out, we have to subtract that three grand or whatever the amount is from your available balance on your now current statement. We can't go back and say, Oh, well I use that three grand to pay my rent. No, no. We have to take it. So if you only have 3,100 are showing on your new. your new account balance and that deposit from two, almost two months ago, but it's still on there. Mm-hmm. is 3000. Well now you have like a hundred bucks left in your account. That's usable funds to close. Right. So it can become a really, really big issue. And there's no, there's not many ways around it once it's there. So that's one. It's the large po. The other is, is is the gift. Anytime there's a gift, you need to make sure you're alone, officer know. Because again, it goes back to that, um, adding that risk layer to your loan and, and it may or may not approve of that gift on there. And then it also goes back to, you know, grandma showing her her bank statements and being able to source the funds. It's all about sourcing the funds. So cash deposits can be a really big issue. Okay. Right. So the next question would be, How do we get around it? How do we avoid these, these gray areas? How do we avoid it? Now, I, I will say, you know, there are some ways that it's okay, you know, where, where we can source it. But when, when you deal with cash and it's, and it's considered a large deposit, it's big enough to be a large. you put yourself in that gray area, uh, potentially for underwriter discretion. Mm-hmm. And what that, what that's gonna mean with cash is if the proof that you're giving them, is that enough to, um, convince the underwriter that that was the source of the cash. Mm-hmm. cash is not traceable. Mm-hmm. for, so they're having to take somebody's word. Now, let's say for instance, um, you're selling a car and you're gonna take the, the money from that car, you get cash. And you're gonna put it in your bank and use it. That's potentially okay. You need a bill of sale that's signed by everybody, and here is the very, very, very important piece of that. If you sell the car for$4,200, you need to deposit$4,200 in cash. Mm-hmm. you can immediately take out. Whatever. Mm-hmm. from it, you can withdraw it, but that deposit needs to match the bill of sale. Gotcha. And this, again, may be in that gray area, but from my experience, what I've seen from underwriters, they want it to be exact. Mm-hmm. if it's$4,200 and five. they may ask for it to be$4,200 and 5 cents in the deposit. Mm-hmm. it needs to be the same thing so they can without question, match that up. Mm-hmm. Cause remember they're protecting their job. Sure. Gray area, they're making the call that protects them. So make sure it's the exact amount. Make sure you have a bill sale if you have, can have it notarized. You know, input on their, you know, cash payment of 42 0 5 or whatever it is. Mm-hmm. the more proof you can get, the better. Sure. Now, if you sold a camper trailer last summer and you've been saving that cash under your mattress and wanna deposit it mm-hmm. no, not Okay. They're not gonna take it from that long ago. can't do that either. Ok. No, you can't do that either. It has to be re it needs to be. So the best thing to do is if you get that money, put it in an account. So, and that's gonna be coming back to your mention of how do we get around this? It's not really getting around it, it's going through the proper methods of what we call seasoning your funds. Gotcha. We can use cash, but they have to be. You know, and I don't mean seasoning like you put a little barbecue sauce on and I mean seasoning like you put it in your bank account. Yeah. Yep. Absolutely. So that, that's all seasoning is seasoning is taking that money and putting it in a bank account and let it sit there. So I, I need to see two full months of bank statements. Mm-hmm. that do not show that deposit. Gotcha, So, So you say two full months, two cycles, and that could be anywhere from 45 days to more than 60 days if it could. Yeah. You know, Yeah. Yep. It depends on, they make that deposit, it hits the bank as a quote, unquote deposit as a line item, shows that dollar amount. And again, if that 4205 cents doesn't match up with the$4,200, It would be best to go ahead and let that money season, let it season two cycles. It's honestly, it's better to let it season in general. Yeah. Yeah. I mean, it, it really takes away the question because then we don't see it. Okay. Cause it's all about seeing that deposit. Mm-hmm. if the underwriter sees it, they can't unsee it. Correct, Correct. Right. And so when we turn in a loan file, if you're bringing funds to close 99% of the cases, we need two months of bank statements. There are some exceptions to that. So loan officers listening don't get in a wad. But there are exceptions to that. But in general, if you, if you've cleaned it for two months, if you season it for two months, we're not gonna have an issue. Right. But if I'm turning in two months of statements and that last statement catches that deposit, You know? Mm-hmm. on the very first day of that statement, it's in there. The underwriter's gonna see it. It doesn't matter if we say, Oh, well we got a new bank statement coming out. We. we can exchange it. You know, we can use the new bank statement. No, sure. The underwriter's seen it, right? So, So we also wanna make sure, at least for our standpoint going forward, we are not coaching folks on how to quote unquote, Launder money and or do anything negative, uh, or breaking the law. Uh, what we are discussing here today, of course, is, uh, is avoiding the gray areas, avoiding the pitfalls of, of having to go back and, and, and explain and, or, uh, put our donors, relatives possibly, uh, you know, uh, through a, through a ringer, uh, which again, we can avoid. Again, following a couple of simple guidelines, which, uh, by this one, using cash in this transaction or this type of transaction, uh, we're looking at seasoning, like you said, and like we said, uh, for at least two cycles, right? And again, that removes the gray area from the. Underwriters. Yes. Um, point of view. And, and then that way they are looking at, again, a seasoned amount of cash available funds. Yep. Funds, which, uh, which are now, uh, again, able to use in the transaction, which we're speaking of, which is a mortgage. Right. Without any discretion. Yeah. Any issue. So, Perfect. Perfect. Just wanna make sure that we're, we're putting out our public service announcement here, that we're not, we're, we're not advocating any of this negative. No, And it's nothing. Yeah, no. And there's nothing illegal about it. I mean, this is just part of the process and it's how it's done. I didn't come up with those rules. Those are just, Those are just the rules. The money has this evening. Mm-hmm. The banks are responsible for taking care of the people who are money laundering. I mean, if you're depositing a lot of cash in your account, you may have to deal with the bank, but as far as the mortgage goes, I can't see if I see that large deposit we have to source. And large deposits are not just cash. There are other forms too. Yep. But cash tends to be the one that causes the issue. Sure. Being able to source it. Now I see people who, um, have source of funds that are an issue that we have a hard time sourcing because they've lost the paperwork. They don't know how to find it. Um, they have to get a statement, like a retirement deposit. Sure. Uh, I see people take money out of their, their retirements all the time. Like, Yeah, we're gonna, we're gonna take money out to the down payment and that's fine, but you still have to source that money. I'm gonna need to see the statement from that account. Yeah. And I, it's gotta be specific, like, I gotta see the money coming out. I gotta see the money coming in. Mm-hmm. Cash is not the only culprit, but cash is the one that generally causes Yes. Causes the most issues. Yeah. Yes. And, and this again, is gonna help again with proper communication, uh, and, or honest, I should say communication. Mm-hmm. um, you know, again, you're, you, you as a loan officer as well as any of the other brokers, we would assume that they would certain. Give a forewarning to say, Hey, if, if you do, if you're looking for a gift or whatever from a relative, fantastic. Again, we would prefer not to have that as cash, for the reason being we need to have it sourced and to avoid again, um, putting our relatives or or these donors through the ringer. You know, again, let's use a different method, uh, whether or, or not that be a certified check. Um, basically anything other than, Let's talk to your loan officer. That's, that's the best thing that you can do. Mm-hmm. talk to your loan officer and look, you gotta be honest. I'm telling you right now, you need to be honest about everything you're doing with your money and your finances. Yep. It's going to come up. If you're hiding it from me, I'm, I may not find it as the loan officer mm-hmm. but it, it very well will come up during the underwriting process. Yes, Yes. So just and untimely again, these are untimely. Yes, yes. These discoveries usually happen, you know, three days, always three days or maybe a week before closing. And, um, and this is where it becomes an issue. Sometimes two or three days before closing. Yes, yes, yes. Absolutely. I, that happened, I'm, you know, I've, I've, I, you know, it happens and, you know, and that brings me kind of to another one. Cause I have a similar situation and it's, it has to deal with cash, but it doesn't have to deal with bonds to close, so. Mm-hmm. I wanna touch on this real quick. There are other things that we look at in the mortgage industry that are used to supplement somebody's file. And one of those is rent. Oh, rent history can play a big part of your mortgage application. Um, sometimes it depends on, you know, somebody maybe has a lower score. Or it's a, a, a file that's a manual underwrite, which means it's kind of, it's one of those files that's, there's a lot of gray areas on when it's a manual underwrite. There's a lot mm-hmm. and they have a lot more overlays and rules when it's a manual underwrite. They're doable loans. But we gotta be careful, We gotta, you know, cross our t's, dot our i's, make sure everything's good, and that underwriter is going to pick this file apart. Okay? Mm-hmm. Rent can play a really, really big part of that type of loan. Mm-hmm. especially on a va. Um, VA's, you know, one of the ones where it does so mm-hmm. we get a, what's called a verification of rent. And again, it is different depending on the loans. So I'm just gonna speak in general. We may need a 12 month, we may need a 24 month verification of rent. And what that is, is where we send a letter to the landlord and we have them fill out a form and they send it back to us. Mm-hmm. So let's say that the landlord sends it back to us and it's a private lender. Mm-hmm. or a private landlord. My apologies like, Jeff, you have a rental house and you don't have a property manager. You go and, you know, they bring the rent check to you every month or whatever it may be. So it's, it's considered a private landlord. It's not a, a mark a property management or any corporation like an apartment building managing it, right? So if when it's a private lender, underwriters get a little more particular, the guidelines can get a little more particular about how we prove that rent is being. Sure. So they may ask for proof of it coming outta your bank account. Mm. They may ask for 12 months to cancel checks. Sometimes they'll ask for 24 months to cancel checks. It just depends on the pile. Mm-hmm. But let's say they ask for proof. They either they want 12 months to cancel checks. Well, what if Bobby's paid his rent and cash every month? Mm-hmm. Right. That's no proof. And now we're in a pickle. Yes. Yes indeed. Yes, indeed. One a. A really big one. Mm. Okay. So there are some lenders out there, and I'm not talking about like va, fha, I'm talking about actual mortgage companies that will not accept cash payments. It. There's possibility of getting around, not getting around it, but working through it is more like the thing. If you have receipts, maybe a letter from the landlord type of stuff, you can work through it. But again, it's putting you into that gray area and it is a discretion of the underwriter a lot of times. Mm-hmm. Mm-hmm. paying cash for your, your mortgage is not good. Or your, your rent is not good. Right. Um, the other thing too is you're leaving yourself wide open for that landlord to really take advantage of you and take your cash and run off with it. Well, yes, of course. That would be the worst thing. That would be the worst scenario. Absolutely. And people don't think about this, but. This is something that actually comes up a lot. I've actually had to tell people that I couldn't do a loan, you know, because of this so, If you are renting from a family member, don't pay them cash either, right? Okay. Pay them rent, pay them what you're supposed to pay them, but give them a check or give them a money order. Give them a certified check. Do not pay them in cash. And honestly, it works better. Like if you're trying to buy a home and you're a first time home buyer, you're trying to build your credit, you're trying to, to get into your first home. Mm-hmm. it looks better. on the file. If you've been paying rent, if it's 500, if it's 600, whatever it is, a thousand dollars a month. Mm-hmm. if you can establish that payment history, you are 10 times better off than somebody who's just paying them in cash. So pay, pay them. If you're supposed to be paying them rent, pay them. Mm-hmm. But don't let them talk into giving them cash because it does you a disservice. Now, if you don't ever plan on buying a. there's, there's no way you're ever gonna buy a house. I mean, that's up to you. You're taking your risk. That's, you know, your call. But if you have a, a plan of buying a house in the next year, and you need to be thinking about this a year to two years out in this situation. Mm-hmm. don't pay cash. Right. It doesn't exist. If you pay cash, it doesn't exist. You have lost all of that rental. Okay. About paying and cash. And is, uh, it typically, uh, you know, nowadays where realtors, um, are asking for folks, uh, pre-approval and or pre-qualification letters mm-hmm. typically in the pre-qualification or pre-approval process, um, is, is there, uh, Um, much scrutiny involved, uh, you know, again, pre-qualifying or pre-auth, uh, you know, uh, pre-approving folks for, for mortgages, it depends on the loan. Initially, it depends on what type of loan it is, whether we ask for it or not. Some or room, some are more difficult than others when it comes to rental history, so it just depends on the, the type of loan. and it's one of those things like VA's really particular about it. They want it so it's a VA loan, it, it's something that should probably yeah. Be discussed. Mm-hmm. upfront. If it's an FHA or conventional loan, it doesn't come into play as much as it does, so, Okay. It's not, honestly, it's not always an upfront question and it honestly, it probably should be an upfront question, Do you pay rent? What is your rental situation? Just in case we need it. Sure. Sure. So, so, so, you know, again, a good loan officer will ask those questions, uh, again, depending on what kind of, uh, uh, loan we're getting into, what kind of product we're using. Okay. Right? Yeah, exactly. Fantastic. All right. Yeah, and just protect yourself. I mean, it's all about one, even if you're getting a mortgage or not getting a mortgage, protect yourself. I mean, yes. I, I have seen it happen personally where people, you know, you turned in cash. It never makes it. I had a friend gets Yeah, it never gets there. I had, honestly, I had a friend this weekend, um, down, and she lives in a complex where they have a box to put their rent money in. Mm-hmm. and a lot of people paying cash and they put their envelope and they slide it through the hole and they put it in there. Mm-hmm. Well, they caught somebody at this box. With a magnet or a, uh, some kind of, that they had come up with something with like a string. Mm-hmm. and like something sticky on the end. And they were pulling these envelopes out of the box. Oh, well, And stealing money. Yeah. Stealing the money. Yes. Stealing the money. So then what happens? There's no proof. There's no proof. Well, the landlord didn't get the money. You paid it, you're out. I mean, do you have an additional. Additional money to come up with another. Mm-hmm. you know, eight,$900 in cash. Mm-hmm. to pay your landlord that month. Probably. I mean, you know, nobody, even if you do, you don't want to. Right. You know, So protect yourself. Don't you know, Don't use, don't use cash. Yes. Yes. Let's let this void, let us avoid using excessive cash, Underst. and if you're going to buy a nightstand off of, you know, Facebook marketplace, you know, big deal, you know? Mm-hmm. Mm-hmm. Venmo. Honestly, Venmo is, you know, my go-to, but Okay. Um, well that's, that's, that's a good point there. So, so in today's world, you got Venmo, PayPal. Mm-hmm. you a couple of these other items, uh, or I should say, uh, cryptocurrency opportunities to move money from one place to another. Um, are, are those considered cash transactions and or would your underwriters be looking at your PayPal accounts and so forth? Not typically. And, you know, it's not something that I have really dealt with, and I'm trying to think this through as you're talking to me about it. So what happens with the, the electronics sources of funds like Venmo and, and PayPal to get the money to make the money usable, uh, for something like. that's not a Venmo transaction or a PayPal transaction. Mm-hmm. you have to transfer that money into your bank account. Mm-hmm. So if you transfer the money into your bank account, and, you know, most of the transactions that I see are smaller when it comes to these things. There's, you know, 3, 4, 500 bucks maybe. Mm-hmm. they're usually not large amounts, but if it were a large amount, if it, if it crossed the threshold to be considered a large deposit, you would have to source. To use it. Just because it came from PayPal doesn't mean that's, that's not a source that money. Where did it come from? Why was PayPal giving it to you? Because PayPal is not a source. PayPal is just a method of moving money. Correct. PayPal's not a job, right? PayPal's not the IRS pay. PayPal is not your pension. It's not earning you money in any way. It's a source of moving funds. Mm-hmm. So in order to use that money, I'm probably gonna have to source where the money came from. So if you. you know, Jimmy off the marketplace, you know, transferred you 600 bucks or mm-hmm. I don't know, let's say 6,000 bucks for a car or something. Mm-hmm. Mm-hmm. You're gonna have to source it, you're gonna have to show a bill of sale, or you're gonna have to see Jimmy's, you know, account statements or something as a kid. Absolutely. Or you're gonna have to let that money sit in your bank account past the, the two month mark. Yes. Season seasoning cash. Yes. All right, fantastic. On that one. Um, and, and we already covered, there's no real dollar figure, so, you know, where banks looking at$10,000 in order to report to IRS and, and meet their guidelines. Um, an underwriter does not care about a specific dollar amount. What they're looking for is deposits in and again, deposits out. Well, there the source, there is there, there are, Yes. There are. Dollar amounts. Yes, there are. Mm-hmm. the rules vary depending on the loan product. Gotcha. Yeah. So they're looking for Depo, They're not looking out. They do look it out for like bills that are not being disclosed, but they're looking at money coming in. Mm-hmm. how much is it and if it, if it surpasses or crosses that large deposit threshold, whatever it is for that loan. Sure. Where did it come from? Right. Okay. Wonderful. So, so, uh, as we were getting ready, uh, to come on here today, um, I did make a small list of, of, um, uh, simple rules. I hate to use the word rules. Rules, but, uh, but guidelines, you know, again, to kind kinda keep. Um, on the up and up, yes. Uh, but at the same time, keep us away from that gray area where the, uh, underwriter, you know, again, with, you know, sees a flag and, and, and, and starts questioning. Keep us outta the gray area. Keeps us outta the gray area. All right, so, uh, you know, number one I was looking at, of course, Uh, was, was, was, again, the two cycles. We need to mm-hmm. we need to make sure that, again, if we have a deposit in there, we're not gonna see that deposit of excessive funds, cash funds. Uh, again, looking out beyond, again, a two cycle, uh, two cycle process. Two, yeah. Two full bank statements. Two full bank statements. Um, and I, I, I also wrote down, you know, basically if we have a, if we do have a large cash deposit, just like you said, you know, you may have sold, uh, a bunch of old cars outta your front yard that have been sitting there for a while, you know, and, and the junk collector came by and offered cash fee to do that. If you were to go ahead and deposit that cash, we're looking at, again, two cycles, or what I made over here for a, for a note was three months. Um, Or, or make sure that your receipts match up. Exactly. You get a receipt and the receipt says that you got six grand for the junk cars. Make sure that that deposit says six grand. That can still be a little, can still be a little iffy. It helps if it's a professional receipt, like from JJ Auto or something of that extent, but yeah. But, but it may be, you know, doable if you have the receipt. Yeah, so, so there are some instances where we can get, you know, accept it. Gotcha. Perfect. Um, the third one I have down here is basically open communication with all parties. Yes. Yes. Okay. All parties, meaning your team. So basically if you're buying a new home, um, it is going to be you and whoever you're buying the home with, spouse or not. and your mortgage representative here, as well as your realtor mm-hmm. um, as well as the attorneys involved, uh, and so forth, that again, everybody's gonna get some portion of acknowledgement of these funds and or transactions. Yes. If, uh, if anything was to show up again in the gray area. Right. So, Yeah. Yeah. And I want to encourage, you know, anybody who might be listening, whether it's a realtor, whether it is. An attorney. Mm-hmm. Mm-hmm. uh, seller's agent. Mm-hmm. any of those. If you get a check that is a different name for a due diligence deposit or an earnest money deposit, and it's not, you know, if you have Bobby Smith and you get the, the check and the last name is, uh, more or a different name. Mm-hmm. ask questions. Mm-hmm. Sure. Absolutely. Because it's better to catch it then before that deposit is made. Yes. Once that deposit is made, then we've. We may potentially have a lot of backing up that we have to do. So catch it. Just ask the question. Hey, is, you know, um, or call. If you don't wanna ask the borrower, call, call me. Call me, call your loan officer. You should have a relationship. You guys should be speaking. Pick up the phone and say, Gina, I is, is, you know, is Mrs. Moore on the loan? I gotta check here. I just wanna make sure we're okay. That's cool. Exactly. And I'll tell you, um, yeah, we're good to go. I, I've already known about this, Emily, like, whoa. Hold on. No, I don't even know who Mrs. Moore is, so, Right. Um, yeah, so just, just follow up, just communicate, you know, and it's, it's like just catching those little red flags could really save a deal. Yes, Yes. And, um, and, and in today's market or today's world, yes. Uh, we would like to avoid any of these hiccups, uh, you know, again, as much as possible. Um, and, and as quick as possible being notified of anything that we need to know. Okay. And, and, and, and along with that, of course, I, I, I mentioned the gifts, uh, and bank statements. Mm-hmm. um, and again, with communication, you know, uh, Aunt Mary went ahead and sent me, you know,$10,000 two months ago as my marriage gift, and I deposited that. Mm-hmm. um, you know, again, if you see that deposit in there, we just need a copy of the check in most cases. Otherwise, if we season that, if we season those funds and we're beyond the two statement, Then typically that money is in there and, and can be used as, as funds moving forward? Well, if you get a, if you get a check from somebody, you're, you're gonna have to source that. You're gonna have to have, have their bank accounts. Okay. If the, if the check comes from, like, if it comes from an individual, you're gonna have to source it. Mm-hmm. If it comes from a company, let's say it's a pay stub, it's the irs, it's a pension, then you still have to source. It's a little easier to source it. Mm-hmm. But if it comes from an individual, you may be getting their bank statements, so mm-hmm. Right. Se season, the seasoning is the trick on that. It keeps you from having to jump through so many flipping hoops, you know, So Understood. Understood. Yeah. Understood. And, and, and of course, as I mentioned to all my clients, you know, um, it's fun to start looking for a house. Yes. It's a little stressful once you first get under contract. Um, again, negotiations, getting a purchase price. Earnest money, due diligence, funds to be deposited, things like that. Um, and, and that's a stress at the beginning of our process. Mm-hmm. and, and I say that's basically your process, the mortgage side of things. Mm-hmm. And we have typically a, uh, maybe a two or three week window in between where we have our inspections done. We're explaining, we're negotiating a couple of things. And then again, we have our final week. Can be very stressful. Um, items like this do pop up on a regular basis. Uh, they do need to be. Um, and or as we, as we keep mentioning sourced, and, um, and again, if we, uh, if we have these items out in front of the clients buyers, um, you know, again, they shouldn't be such a surprise, but you and I all know you and I well know, um, you know, it pops up all the time. if it can happen, it's going. Yes, Yes, yes. Exactly. And it does all the time. And I get that everybody, you know when they finally get to a place and you realize you can buy a home, you get excited about it and Absolutely. You get excited about it. And if you're like me, I like to do, I'm like right now, like, Okay, I can buy a home. I'm ready to buy a home. I'm gonna buy it tomorrow. Right? I don't wanna wait. Yeah. Right, But you may need to, you know, you may need to wait. It may be in your best interest to give it those two or three months before you even start thinking about it or going under contract. Cuz once you're under contract, things have to start happening. So let's, let's plan accordingly. Talk to your loan officer. Tell them all about your finances, overshare. Tell them where you're getting your down payment from. Where is it coming from? Even if you don't think it's an issue, it could be an issue. Tell them overshare it. Give them details we need to know. And confidentiality of course is something that, uh, and your side of the business as well as mine. Yeah, absolutely. You know, we, we, we are working as fiduciaries and we certainly do not share this information and ethically it's, it's against just everything that we do. Um, so, Right. Absolutely. Um, you know, again, human nature being what it is, you know, you must have some level of, um, faith or trust in, in your team. Um, and if you don. Again, it might be time to look, look for other team members. Again, someone that you certainly do trust, but regardless of who those folks are, uh, this information is going to be shared and or investigated, um, by all parties. Um, so whether it's you, whether it's me, whether it's, you know, one of our competitors, you know, again, these, this information is gonna be shared and asked for, uh, by all folks involved, right? Absolutely. Okay, good. All right. Well, what would you have then for a final message or a final, Um, yeah, just, just, just note for what it is that we're covering today and, and, and how to stay outta this gray area. Yeah. So if you have a specific scenario that you know, you think may cause you an issue, call, you know, call me. Or if you were working with a loan officer, call your loan officer. Call, call your financial person, your lender, and ask them. What do I do here? Mm-hmm. I, I plan on using this cash. How? How can I use it? How can we be okay? Ask the question up front. Don't wait. Absolutely. Absolutely. And, and, and as you mentioned earlier, that in itself could save the deal. Um, Yep. And, and, and in today's world, again, our, our, um, due diligence deposits as well as our earnest money deposits are, are, are larger than they have been, you know, in the past five or six years. And, you know, we don't want to just give that money away or for intents and purposes, lose that money. No. Um, again, because we are, you know, not. um, as communica not communicating as best as possible. Yep. Absolutely. All right. Well, Gina, how would somebody get in touch with you, Yeah, so you're gonna see a link in the show. You're gonna have my email address and my, my socials will be down there, so you can shoot me a, a mess book message on Facebook. You can shoot me an email. Um, believe my office number is listed down there as well. Absolutely. And, and again, if you have real estate needs, my contact information is down below as well. Um, And, and, and I'm gonna be working on more of my social media existence, uh, as well as anything else that needs to get out there. So, um, so yeah, a few folks have any questions, uh, about anything that we discussed today and or anything with the real estate or mortgage industry. Please don't hesitate to give us a shout. All right, you guys, thanks for listening in and talk to you soon. Thanks, Jen. Have a great day. Thanks.