June 2, 2014
A reader asks, “My mortgage lender is requiring that I show a bank statement as the only acceptable proof that the earnest money check cleared. Although I have nothing to hide I feel tremendously violated…”
“…I feel there are less intrusive ways of showing proof. I have distrust with the system that assumes we are all dishonest and finds the most intrusive way to show something took place. I am frankly shocked to be told that this is a common well accepted practice and the only acceptable manner. Please let me know if indeed there is another way today.”
FHA loan rules do require the lender to verify the source of earnest money. HUD 4155.1 states, “If the amount of the earnest money deposit exceeds 2 percent of the sales price or appears excessive based on the borrower’s history of accumulating savings, the lender must verify with documentation the deposit amount and the source of funds.”
While it is true that the FHA rules say acceptable documentation for earnest money can include the canceled check or certification from the deposit-holder acknowledging receipt of funds”, FHA rules also add that “separate evidence” of earnest money sources is also acceptable to include a bank statement or verification of deposit.”
FHA loan rules aren’t the only regulations at work in these cases–lender standards may also apply, and in the case of this reader question it may well be that lender standards require the bank statement. In such cases the borrower doesn’t have much of a choice if the transaction is to be completed and the loan approved. Lender standards, as long as they conform to Fair Housing Act laws and are applied equitably, would still apply in these cases.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at www.FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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