I am hoping that someone with some financial or home-buying experience
can answer this question.

In your experience, how diligently does Fannie Mae (or other
well-known lenders like FHA) check the seasoning and source of one's
downpayment and/or reserve funds? I have read and heard that the
6-month and 3-month seasoning guidelines for reserve/downpayment funds
is just that...a guideline...and that this amount of time is not
always required. Is this true? Is it a subjective issue on the part of
the underwriters (i.e. if the rest of your portfolio looks good, then
they will be lenient on this factor)? If one sells some assets, like
jewelry or antiques, to get this money, it seems like it should be
just as good as if the money were in your savings account (you owned
it afterall). And also, if the person that you sold the asset to
happens to be a relative, do underwriters somehow consider that a
gift, or is it still a sale? Do they always demand to see receipts for
recent large (e.g. $5000) deposits into your savings? Must they be
signed by a notary?

The triplex we are looking to buy will probably appraise for more than
the asking price, plus we will be garnering rent income from it. It
just seems the seasoning guideline is awfully strict for a deal that
has so much else going for it.

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Request for Question Clarification by 8ball-ga on 20 Jun 2002 04:45 PDT

Do you require Fannie Mae experience for your answer?  Do you require
expert, industry-wide knowledge or is personal experience sufficient?

I bought a place about two years ago and had to deal with this issue. 
My aunt died and left my parents some money.  My parents decided that
my aunt would like it if the money were spent on my first home, so
they gave me $20,000.  (This is the most they could give without
paying a gift tax.)  Despite the fact that I did not need the money
for the down payment, I had to deal with your issue.  (By "did not
need," I mean that my total cash/stock assets when it was all over
were over $20,000.)

They made me get a signed (not notarized) letter from my parents
asserting that they money was intended as a gift that I was not going
to be paying back.

My broker told me that in the future I should make sure that either:

1.  I get any gifts into my bank accounts over three months before the
loan.  All they wanted were bank statements for the past three months.
 If the money came four months ago, they would not know.

Or.

2.  Since I did not need the money, I could have waited until the day
after closing to deposit the $20,000 check.

Just before my last refinance (I have refinanced 4 times now) I sold
my old car and bought a new one.  This caused an outflow of about
$35,000 followed by an inflow of  $5,000 (from selling the old one.) 
I just told them I had bought a new car.  They did not make me provide
any documentation in this case, but I was not making a down payment. 
I was refinancing an existing loan at its current balance.

If this is good enough for an answer, let me know.  Hope it helps
regardless.

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Clarification of Question by dnartist-ga on 20 Jun 2002 07:36 PDT

First, it looks like we're probably going FHA instead of conventional.
This really seems to be a question of "Show me the money." My partner
and I were both raised to keep our "wealth" in personal assets instead
of in accounts, thereby better avoiding the temptation to spend. We
were always of the mindset that, if something comes up that's
important enough to make us want to go through the trouble of selling
our assets, we simply would do so and spend the money then. My partner
has some heirloom jewelry (offically appraised) and a personal family
loan that she can collect on at any time. I myself have invested in
antique collectables and some jewelry. We have receipts and promisory
note copies from the sale and collection of these investments over the
last couple of weeks. We "ran across" a great deal during the early
part of our house-shopping phase and jumped on it, thus we don't have
"seasoned funds" just these funds from sales/collections. Also, the
official appraisal just came in, and the two apartments (currently
unoccupired) we will be renting out will garner about 75% of the
projected monthly mortgage payments. The triplex also appraised for
about 1,500 more than the asking price. Oh yes, and the seller has
agreed to pay 3,000 toward our closing costs. It seems like if 1) we
have the money to cover FHA downpayment and reserves with receipts to
verify sale of the invesment items 2) good appraisal 3) good credit
with our average scores being 640 for me and 690 for her including a
711 4) good employment history, education and OK debt-to-income --
then we should be relatively low-risk. Would the fact that we sold our
"investment assets" so recently really queer the deal? Just how much
documentation do FHA underwriters need in this situation? Will my bill
of sale for my antique watch be OK, or do they need a letter from my
Dad that I "inherted" it from him in the first place to prove that I
didn't steal it to then sell? And what about collectibles? If I bought
an antique coin 4 years ago knowing it was more valuable than the
seller was letting it go for, and then sold it today for a profit,
what's wrong with that? Buying this home quickly is exactly the kind
of situation we had these sellable assets for. Do they not count
because we're selling them just now instead of 4 months ago? Closing
date is contracted for the 12th of July, and we're afraid to ask the
seller to renegotiate it because we know she has backup offers. Is
there anything we can do to improve our situation here?

Ok.  Your clarification makes it clear you have something specific in
mind.  I don't know enough to attempt to really answer.  Some feedback
however is that in principle there is no issue with what you are
talking about.  In practice, it is easier to deal with bank accounts
than with jewelry because bank accounts come with statements, etc. 
However, getting something appraised or having official documentation
should also be acceptable.  If you sell something of value, the bill
of sale should be acceptable.  Your life would definitely be easier if
you had sold the stuff four months ago though.

As far as assets "counting," my understanding (as a consumer, not an
expert in the field) is your liquid assets are not all that important
when you are being considered for a loan.  What they really care about
is:

1.  Your housing ratio.  (This is the ratio of your income to your
total principle, interest, taxes, association dues, and homeowner’s
insurance.)  Even if you have a lot of cash, you could just spend it
the day after closing.  They want to see if you can pay your loan off
even if you blow your savings.

2.  Your loan to value ratio.

The reasons they want your assets to be yours (with documentation) are
twofold:

1.  If you are using the assets for a down payment, they want to make
sure you really own the equity in your house free and clear.

2.  Even if it is not a down payment, they want to know about all of
your debts when they determine if you can make the payments on your
loan.

At least this is what has been true for me.  I have excellent credit
and more assets than somebody of my salary usually has.  I discovered
that the limiting factor on how much I could borrow was basically my
salary.  Sure, assets helped get the loan approved, but they did not
matter too much and did not seem to affect what I could borrow.

Hope this helps.

8ball-ga

As A proccesor dealing with FHA loans, I think that three months
before closing are just that a guideline, however with FHA and a three
family home you must have three months reserves. (meaning you can make
up to three mortgage payments with the money you hove now at closing).
with you home hopefully already closed upon this may come late but its
good to now anyway.
In general you should also be aware that the cash you have should not
borrowed or on loan from a family member (hence the 'gift letter'
mentioned earlier). As long as you can prove the money you have in
your account is yours free and clear, FHA underwiters dont care where
it is from.
Also assets such as antiques and collectables are only considered
compensating factors that only support the underwiting dession.
Enjoy your home