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Stop IRA distributions after closing

Hello! My mother in law is closing on a home and her lender is using an investment account + a monthly distribution from her IRA to qualify her for the loan. She wants to stop the IRA distribution after closing (as they will be early distributions). Is this permissible? Are there any risks of her changing her income after closing on the home? by jenniferhaimovich434 from , California. 7 days ago Reply


Technically speaking, in order to qualify for the mortgage using IRA distributions (I'm referencing Agency Fannie Mae & Freddie Mac Guides - Conventional Financing) then she had to prove 3 years continuance of the income.The lender is basing her loan approval and commitment to lend on the premise that the income will not be changing and that income is how the DTI (debt to income ratio) has been calculated. On the other hand this is the land of the free and the home of the brave, and post closing if a clients income/assets/credit worthiness changes ....there's nothing the lender can do. The Grey area (and I'm sure it's probably why you are asking in the first place) is if she is knowingly doing this at time of application. But again to prove this would be difficult, I think the only way it could come back to her would be if they needed a post closing condition around the income and couldn't supply it...which the likelihood is low.Since things can be taken out of context, let me provide a disclaimer here- DONT commit fraud, be truthful with your lender at all times. What I am saying above is just the technical aspect, let me share some examples Example 1.) Credit Worthiness - Borrower qualifies for loan with 780 score, 1 month after closing she forgets to make 3 credit card payments & 1 auto payment because her address changed and she didn't receive her bill notifications. She should have been on auto pay or taken some preventative measures but didn't, now her credit is 580. That's a significant change shortly after fundingExample 2.) Occupancy - Borrower purchases an owner occupied with 3% down, 1 week after closing gets mugged or assaulted in the neighborhood or at the residence via a break in. He/she and their kids can no longer feel safe living there, but need to make the payments still, so they decide to immediately move out and convert the property to a rental. Example 3.) Income - Borrower makes $10k per month salary during purchase qualification, after funding the Corona Pandemic hits and they are deemed non essential, so they lose their job. Their salary is no longer $10k it's 0Example 4,) Income around asset investments - borrower buys a home, using retirement accounts to qualify, post closing her investment take a hit due to market correction, so she is advised to reduce or halt distributions. But again, ALL of the above were non intentional. It's the intent that makes the difference. If it's something your mother in law has predetermined, then she is lying on an application in order to qualify. And again, technically any client is free to do anything they so choose to do at anytime whether it be move, ruin credit, lower or increase income or assets. You have been given enough info here, with both sides of the pendulum fairly explained...the moral and right choice is now in your hands. Best of luck

7 days ago
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Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,137 contributions

Tell your mother-in-law that she can make any change she wants to the amount she receives. She can increase the amount withdrawn, reduce the amount withdrawn or even stop them altogether. Personally, I would wait until escrow closes and she makes the first mortgage payment, then make the change. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ At NEXA, we've got you covered. We are licensed in all states except MA and NY and we are pending approval in VA, so give us a call. ~ www.ApplyYes.com 480-889-9000.

7 days ago
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,213 contributions

I won't over complicate the answer, which is yes. Simply put, no lender can stop you from doing anything after closing.

2 days ago
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