It appears in the brave new world of mortgage lending, paper checks have all but disappeared. They have been relegated to the land of shredded paper or electronic storage. Banks no longer even keep paper copies. Great news for the trees, however, this is often bad news for borrowers. When making a large purchase, it is important to keep the associated paperwork in order to meet the lender’s documentation requirements. We are all aware of that fact since we filed our first tax form. What makes mortgages different is that not only the paperwork counts, but the “source” as well.
Over the last few months, I have had more and more buyers use money order to pay their earnest money deposit when entering into agreement to purchase a home. That decision just created another step (or three!) in the loan process. So, realtor and buyers make sure you save yourselves some time and effort. Please use CHECKS, not money orders.
Borrowers must “source” money orders. What that means is the Lender not only needs a copy of the original money order and the realtor verifying the deposit, but now they also need a bank statement (or statements!) to show where they withdrew the cash for the money order. Perhaps the buyer withdrew it over three months as a “savings plan”, which means they have to produce three more months of bank statements where the withdrawals match the earnest money amount exactly.
Lenders want to make sure these funds used for the money order are not a gift towards down payment or a cash advance from a credit card. The gift process creates a different set of paperwork that I will talk about in a separate blog. So, my advice to buyers and real estate agents: Please use paper checks and be sure to keep copies to make your loan process smoother. It will create a better transaction for all.
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