Seasoned funds are money that has been in your bank account for at least two months. They serve as your cash reserves, and make up your down payment; they’re liquid assets that will boost your mortgage application.
No matter how much a home mortgage calculator in Utah, Arizona, or New Mexico tell you to save, it has to be document-based. Here’s why lenders like American Loans want to see a paper trail:
Guaranteeing That You Can Pay Your Loan
First of all, your prospective lenders want to see proof of seasoned funds to make sure you’re not living paycheck to paycheck. A mortgage payment is the biggest and perhaps the most frequently recurring bill anyone could have. If you can get by without touching a significant amount of money in your bank account, it’s an indication that you can afford loan repayment.
Ensuring Your Debt-to-Income Ratio Is Accurate
Some borrowers get cash advances to create a false impression that they have adequate assets—and lenders know this. Seasoned funds must be savings, even those you might receive as gifts. When you take out a loan to make you look more financially flexible, you’re going to increase your debt-to-income ratio. Unless your income suddenly increased concurrently, borrowing cash to borrow more cash wouldn’t bode well for your mortgage application.
Lenders would look for proof to conduct an investigation. They want to see two months’ worth of bank statements because loans typically get reported to credit bureaus within 60 days.
Although your mortgage lender can take your property if you default on the loan, foreclosure doesn’t create the best situation for all parties. Foreclosed houses are non-performing assets, and staying that way could mean considerable financial losses for lenders. But when the borrower has enough seasoned funds, the level of risk they have to absorb decreases effectively.
Sufficient savings are a pre-requisite for home ownership. Not waiting until you have enough money to apply and deliberately tricking the other party would put you at a disadvantage.