Avoiding Large Bank Deposits during Your Mortgage Application

Typically, you would celebrate when a substantial sum of money is transferred into one of your accounts, except when you are awaiting the approval of a mortgage loan. In this case, unless you can demonstrate the validity of the deposit, that extra money may cause the loan assessor to reject your mortgage loan.

Don’t fret, though. We’ll explain what counts as a “big deposit,” when this sum won’t be questioned, how to prove the deposit’s legality, and why you should immediately inform your lender if you’re anticipating one of these endeavors.

First of All, What Is a Large Deposit?

Any unusually large sum of money transferred into your savings, checking, or other asset accounts is referred to as a “large deposit.”

That said, any venue where you have money available to you is considered an asset account, including money markets, CDs, brokerage accounts, and retirements.

Depending on where these sizable contributions are coming from, your lender may or may not be cautious. For instance, since the references for these deposits will be readily visible in your bank account, revenue from your regular employers, such as your paycheck or an IRS tax refund, won’t attract any attention. In short, there will be doubt about their validity.

However, your lender will probably ask you for confirmation of who gave you the money if someone pays you back for a personal loan or if you sell your vehicle and deposit the proceeds in your checking account.

Why Would Lenders Even Care about What I Deposit into My Own Account?

By examining your ability to repay the loan, your credit history, and the value of the home in relation to the loan amount, a loan assessor can determine whether you are eligible for approval. Additionally, they ensure that your loan application complies with the requirements for the particular loan type you are requesting for.

Your ability to qualify for a loan may be jeopardized by an inexplicable deposit, particularly if you are unable to pinpoint the source of the funds. In short, you will need to show the origin of the enormous deposit, wherever it may have originated.

How Do I Explain Large Cash Deposits during My Mortgage Process?

Documentation is key in any situation, as each loan assessor may require various types of documents. That said, you should be prepared with the following papers in case they are required.

• The deposited check, which was canceled prior to your application
• A letter explaining why you were provided the money, especially if it was a down payment gift
• A third-party appraisal of the item’s worth
• A duplicate of the ad you ran to sell a costly item, such as an automobile

Mattress money, also known as cash on hand in your home but never placed in your bank or savings account, is the trickiest type of deposit to verify. It is challenging to identify the source of this kind of funding. It is preferable to hold off on making a deposit of these cash amounts until after your mortgage loan has been authorized. Alternately, “season” the cash prior to applying for your mortgage loan.

How Much Money Is Considered Safe to Deposit?

A straightforward method may not be able to determine the amount of money that a lender will deem a substantial deposit. Loan assessors may even consider your entire financial picture. They might not inquire about a $500 deposit if you earn $100,000 annually and have a large amount of cash saved. However, suppose you only have enough money in your checking account to cover the down payment. In that case, you should anticipate the lender asking about any mysterious transfers, even ones as small as $100.

Conclusion

Indeed, it’s important to be mindful of the size of any bank deposits you make during the mortgage application process. Large deposits can potentially delay the processing of your application or even lead to its rejection. If you can, avoid making large deposits or, at the very least, be prepared to explain them to your lender.

If you are looking for a well-trusted mortgage company in Oak Lawn, IL, look no further than MidAmerica Bancorp, Inc. We offer a wide range of mortgages for first-time and returning homebuyers with low down payment options. We are licensed in Illinois, Indiana, Florida, Michigan or Wisconsin. Contact us today at (708) 237-4050 and let us discuss all your available home financing options.