How Paperless Banking Can Get in Your Way

My clients had finally found THE HOUSE, and we’d just finished writing up an offer to purchase.  When I explained to them how the earnest money check was to be made out, they took on that deer in headlights look and told me, “But, we don’t have checks.”  Ah, yes, paperless banking.  And since it was past 5, we spent the next fifteen minutes strategizing how they could come up with the $1000 so that could be converted into a money order.  I got to thinking about it and realized that paperless banking could really be a PITA for people wanting to buy a home.

Here’s a few situations that come quickly to mind, and why you just might want to have a checkbook available to help you accomplish your real estate and financial goals.

#1  Earnest Money Deposit–  when you write an offer to purchase, the buyer is required to tender a good faith deposit.  Yes, it’s true that you can use a money order.  However, if you’re taking out a mortgage, the mortgage company will want a copy of the front and back of the cancelled check.  If you can’t produce one then the amount of cash in the bank needing to be verified by your mortgage company will be affected- and that could leave you in a Catch 22 situation.

#2  If you’re doing contract financing, when you get ready to close, you’ll want the cash to close to come directly out of your bank account.  It will likely help you to satisfy lender requirements down the road when you get ready to refinance.  If you don’t have a bank account, it may be a real challenge to prove that those funds were “your money.”  If you have nothing but a cash card, you may not be able to create a satisfactory paper trail and your mortgage company will require you to come up with the down payment all over again.  Ouch!

#3  If you’re currently renting and are thinking about buying a house in the near future, you may want to pay with a check.  You see, when you get ready to buy, your mortgage company will be obligated to verify your rental payment history for the past twelve months.  (In fact, depending on circumstances, they may not be able to approve your loan without this crucial piece of information.)  Now, if you pay your rent to an individual, your mortgage lender will require copies of cancelled checks for the past twelve months.  (Paid receipts won’t work, and neither will money order receipts.)  If you pay a poperty manangement company, your mortgage lender will accept a form from the property management company.  That usually makes it fairly easy— that is, unless they refuse to cooperate or fill out the form in such a way that it puts you in a bad position.  In that case, you would be relieved to be able to produce cancelled checks.

#4  If you’re buying on contract and are thinking about refinancing anytime in the future, then Paragraph #3 above applies to you as well.

Paperless banking may otherwise fit your life style to a T, however you just may want to have a set of checks set aside just for your real estate and financing needs.

 

 

ing cloWhen you get ready to closee if they are to count that money in

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