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No “Business Funds” Please

We have a section in our “Buyer’s Guide” on our website titled Actions to Avoid After Getting Pre-Approved. It includes all kinds of actions that borrowers need to avoid so they don’t slow down their transaction or blow up their ability to qualify altogether.

Actions to avoid include co-signing for another person’s debt; filing tax returns with taxes owed; filing taxes with declining income; spending liquid assets; not making large, unexplained deposits; and financing cars, appliances or other major purchases.

We are, however, adding one more “action to avoid” b/c it comes up so often:

Do NOT make any transfers from business accounts. Business accounts are more carefully scrutinized than personal accounts. If any large transfers are traced back to business funds, additional documentation will be needed and added requirements will have to be met. This includes having a CPA write a letter to confirm that the use of these funds will not negatively impact your business.

Many of our self-employed borrowers think they can just dip into business funds as needed when they buy a home. But lenders view business funds differently than personal funds – even if business owners have 100% access to their business funds. This is b/c businesses often need to hold more funds in general for working capital and the depletion of those funds can threaten the health of the business (the very source of the borrower’s income in the first place).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167