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I've seen a couple of posts regarding questions about cash and/or other deposits into bank accounts that are holding your down payment or closing costs. Why is it important for the lender to know where cash or other deposits come from that are being used for down payment and closing costs? I can understand the reasoning for wanting to see tax returns, pay stubs, and bank statements to ensure that your income matches what you say it is, but why do they want to know where other deposits came from? I saw someone post about having to explain a $3 deposit that was made into their checking account.
@tony46231 wrote:I've seen a couple of posts regarding questions about cash and/or other deposits into bank accounts that are holding your down payment or closing costs. Why is it important for the lender to know where cash or other deposits come from that are being used for down payment and closing costs? I can understand the reasoning for wanting to see tax returns, pay stubs, and bank statements to ensure that your income matches what you say it is, but why do they want to know where other deposits came from? I saw someone post about having to explain a $3 deposit that was made into their checking account.
we need to know that the down payment/closing costs are from an 'acceptable' source
example of unacceptable sources:
loan from friend
unsecured loan from institution
proceeds from drug deal
cash advance on credit card
example of acceptable funds:
gift from family or close friend/ significant other
sale of an asset (sell 2nd car)
loan against an asset - 401k loan, loan against paid off auto, ect
sale of stocks/bonds
What if it's just savings that one has accuired over time? Reason I'm asking, I have a savings account that I put extra money in on a regular basis. I have no idea where each and every deposit came from. Some come from a combination of sources. Extra income from my primary occupation, gifts, items sold on Craigslist or eBay, side jobs, mileage checks, rebate checks, ect.
Probably a good idea to hold off on random deposits until after you close... if you have funds in there that have been there for a period of time that are "seasoned" (IE: more than 60 days for instance) they likely won't ask about them. I was told by my lender that non-regular employment deposits are going to be very closely monitored and gone through with a fine tooth comb if within the 60 day range. They want to make sure you aren't borrowing money for your down payment from a non-allowed source, and will want proof of any source of deposit within whatever time window they deem necessary. It's a pain but just use whatever cash you get for your day-to-day expenses instead of depositing it and then using your debit card.
The past few months are not a problem. I can figure out where cash deposits came from in that time frame. I was just worried about having to come up with explanations for each and every deposit for the past 6-12 months.