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Earnest money has been one of the many new problems when purchasing a home. All of the mortgage lending changes have caused difficulties, but this one is a tricky one.

Lenders are now required to verify where the funds for the earnest money came from if it will appear on the HUD or if the borrower requires it to make their minimum down payment contribution. The lenders want a copy of the cashier’s check and/or canceled earnest money check and a printout or bank statement showing the funds coming from the borrower’s account. This means that the borrower cannot decide to use cash from home, or sell his guitar collection to his neighbor, or sell his tools to the guy at work who just quit and left no forwarding address…. I am sure you get the picture. And a friend or relative cannot write the check (unless they are going to produce gift documentation) and the realtor can never write a check for the borrower for earnest money. Always be sure the person that provides the earnest money is actually going to be on the loan and is not a non-purchasing spouse, or boyfriend, or fiancé or whatever, unless they are aware we will have to document as a gift from them with all the appropriate back up.

Investors are really picky about his one, so help us all out by looking at those earnest money checks before you turn then in to the title company!

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