If a person’s bank account is full of cash deposits, it’s a red flag to the lender. We need to verify all assets and deposits. This is especially important for down payment requirements.
The takeaway: Avoid cash deposits because you can’t prove their origin.
2. Two-Year Employment Structure
Lenders want to see a two-year work history at the same company and with a consistent schedule. If a person changes companies but stays in the same industry, there should be no problem. If the person’s routine changes (ex: full-time to part time) EVEN in the same industry, that’s a red flag.
The takeaway: When an agent receives the “pre-qual” letter from the lender, have them confirm that the lender has done a verification of employment, which states how long the person has been with the company, hours and pay. The underwriter will take that information into consideration for loan approval.
3. Consistent Income
Like employment structure, a person’s income must also go unchanged for two years. That means the person will have trouble qualifying if, for instance, he/she starts a business or transitions from a W2 employee to a 1099.
The takeaway: Ask tough questions of the lender when you receive the “pre-qual” letter. Questions like:
– Have you done verification of employment?
– Have you looked at the person’s taxes?
– Have you looked at pay stubs?
Photo courtesy of Mark Moz (Flickr)