Surprise Cash Deposits During The Mortgage Process Can Cause Problems
Cash is the ultimate safe haven right? Well if you are in the process of applying for a mortgage undocumented cash deposits can derail the process, and even lead to a denial of your loan.
Lenders want to see stability, the sources of your income, and all other funds which will support repayment of the home loan. Underwriters, the guys in the backroom who review all of your financial documentation, get really nervous when they see large sums of cash being deposited – particularly when it’s just prior to applying for a mortgage. The same goes for transferring large sums of money between bank accounts. Sometimes, such deposits and transfers are completely legitimate. Regardless, this will raise questions. So… if you make large deposits and/or transfers, you need to be prepared, and expect to not only answer questions regarding these bank transactions, but you must provide documentation as well.
Many many people receive the income from their second job in cash. Even if you deposit the cash in your bank account and declare the extra income on your W-2, lenders may not be willing to consider this income.
For instance if you have $7,000 in the bank, but $3,000 was a counter deposit two weeks earlier, the lender will consider you to have only $4,000, the additional money you deposited from under your mattress does not count – if it can not be documented, also known as sourcing, it does not exist!
Cash deposits can be difficult to document, so the best advice is not to deposit cash into your account during the mortgage application process. Lenders will require that all non-direct deposit payroll deposits be verified and documented.
If you have cash that you are planning to use for your home purchase, deposit the funds in your account at least 60 days before you apply for a mortgage. Your mattress money needs to be in your bank account well ahead of your mortgage application.
Your lender is going to want to source all deposits and transfers into your account to make sure you are not using borrowed funds. If you do transfer money from one account to another, be prepared to submit the statement illustrating from where you transferred the money. This paper trail is going to be documented.
Making large deposits or transfers without legitimate documentation is a BIG mistake!
Wallingford PA Real Estate – Wallingford, PA 19086
