Unexplained Large Bank Deposits May Cause Issues In Getting A Loan

February 24, 2015
Large Bank Deposits

Many first time home buyers think they can dump money into their bank account without an explanation. They say, "Who cares where the money comes from." Number one, the government cares and lenders definitely care about "mystery funds" being used to purchase a home. I have had people sell a car or coin collection without any bill of sale, call in a debt due from a friend, gather cash sitting around the house and throw it into their bank account while their home loan is being processed for underwriting submission for approval.

The source of funds you use to purchase must be "verifiable" with supporting documentation and letter of explanation. For example if you sell a car you should have a bill of sale, a copy of the check, and deposit slip. Another common situation is cash on hand which is very difficult to explain and these funds may be discounted as eligible funds for down payment and closing costs. You should accumulate all the funds you need several months prior to applying for a loan because the banks will usually only ask for the last 2 months of bank statements. You can deposit funds from sources such as gambling winnings, debts owed by friends, wedding cash, inheritance, lottery, etc. and you may not have to explain or show the source of these funds if these deposits are made 60 or more days prior to loan application.

There are too many people siphoning cash into their bank and they need to provide documentation and explanations for every large deposit. Please save yourself a lot of time and headaches by accumulating the money for your new home several months before you purchase a home. Also, you need to contact a loan officer to find out exactly how much money you will need for down payment, closing costs, and reserves so you know how much you will need to sock away for your new home. I have had many buyers start the loan process without enough funds to close on their loan and they have to accumulate money while the loan is in process and sometimes people panic and they start depositing cash into their bank account without consulting their loan officer.

Loan guidelines are getting tougher and you need to plan ahead to give yourself the best chance of getting your loan approved and becoming a homeowner. If you have any questions about the funds you will need for a home loan or you want to get pre-approved for the first time home buyer program then please contact one of our team members at 847-516-5743 or fill out the fast track pre-approval form.