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Why is the Mortgage Lender asking about deposits in my bank account?

By Conrad Eberhard

Mortgage and Lending with iBERIABANK Mortgage

September 30, 2010 05:16 PM

When applying for a mortgage loan it is important to understand why underwriters ask certain questions. One of the most popular questions is “why do you care where a get the money for my down payment and closing cost”?

First understand that when supplying bank statements for a mortgage loan, only the past 60 days worth of statements are required. There are a few things an underwriter looks at when they are looking at your bank statements. The one in question are the deposits. Depending on the type of mortgage loan you are applying for (Conventional, FHA, etc.) will dictate how funds can be accumulated in an account per that loans guidelines.

With conventional loans the borrower has to provide proof that they have seasoned funds (funds in an account 60 days or longer) for the minimum down payment of 5% of the sales price. The statements must show proof the funds were saved by the borrower and not a result of a loan or gift. For FHA loans the 3.5% down payment can be a gift from a family member or close friend.

So, the first reason an underwriter ask for proof of a deposit is to determine that the down payment was accumulated correctly according to mortgage loan’s guidelines. The second reason is to make sure the funds deposited in the account did not come from a new loan or credit card advance that was not reflected on the credit report. Therefore not having the correct monthly debt payments reported in the debt to income ratio, which in turn could affect that amount of loan a borrower can qualify for.

So, to answer the initial question. Underwriters have to prove that the funds accumulated in the bank account did not come from a source that is not allowed by the subject mortgage guidelines. The only way to prove that is show where the funds actually came from.

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Matt Grohe

RE/MAX Concepts - Des Moines, IA

Serving the metro since 2003

Conrad: Great post. people get really hung up on this and they really shouldn't.

Sep 29, 2010 04:57 PM

John Cunningham

eXp Realty - Phoenix, AZ

Helping Phoenix Sellers and Buyers find each other

Conrad, I think I'd wanna know a little sumthin about where the $ came from too if I was lending money to people; after all there is a risk the lender is taking.

Sep 30, 2010 05:25 PM

Kathy Smiley

Rodeo Realty ~ Fine Estates Westlake Village - Newbury Park, CA

"Real Estate results that make YOU smile!"

15 days before a close, a client called me to ask where the escrow office was because he had a bunch of CASH to drop off. ARRGGGG! No No No!!

Sep 30, 2010 05:38 PM

Sherilyn M. Whistler

ERA Herman Group Real Estate-NoCo - Loveland, CO

Need a Referral, Call Me !

This is great information to tell your Seller when they first start looking for homes. Leave the money in your bank account alone as much as possible until after closing. I make sure they know DONT PURCHASE anything for your new home until AFTER closing...

Sep 30, 2010 06:09 PM

Donne Knudsen

Los Angeles & Ventura Counties in CA - Simi Valley, CA

CalState Realty Services

Conrad - LOL at some of the questions we get from buyers. After eight years in the mortgage biz, my favorite question is still about bank statement pages. Many years ago, I had a borrower complain to me about providing me with all pages of his bank statements. His response, "seriously Donne, page 6 of 6 is just some advertisement from the bank about using their online bill paying service. They really want that?".

My response, "yes, my darling, super-cooperative buyer. They are obsessed with making sure that the missing page that you are intentionally not sending them is because you don't want anyone to know that you are secretly receiving a gazillion dollars in royalties every month for that homemade porno you did back in college (my client was a recent grad) with your physics professor who was one hot cougar and that is now being sold in 26 countries." After pulling himself together from laughing hysterically, he agreed to immediately send over the missing page.

Over the years, I have used that same response (changing up the illicit activity to suit the borrower) and it almost always results in the same response - laughs from the borrower. Granted, there have been those few occasions where there is just that awkward dead silence but I just blow those occasions off to borrowers with no sense of humor.

Yes, I know, I'm an odd duck with a strange sense of humor but most of my clients like it and it does seem to get the point across that regardless of how much they complain about it, it doesn't change the fact that I need all pages of all statements.

Sep 30, 2010 06:32 PM

Anonymous

None of you look at this from the borrowers prosepective. That is personal information that I do not just give out to anybody. Everybody knows that brokers are crooks anyways and the fact I don't want to give them my lifes story shoudn't mean I cannot get a loan. The fact that I had $5000 in my personal safe was not enough for my lender. She wanted to know where every penny came from and the fact that it came from many years of hard labor and saving to get it just really pissed me off. I shouldn't have to bend over and take it from a mortgage company when I have worked very hard for my own money.

Mar 20, 2012 11:56 AM

Jeff Christiansen

I feel this is very intrusive. So how about this scenario: I am trying to get re-financed on my current mortgage, and am not putting any money down. (It really should be a streamlined process due to the fact that I am using a lender that works directly with the company that currently holds my mortgage. However it is not streamlined, it is a royal pain in the A$$.

Anyways, in this case, why is it necessary that I provide 2 months of complete bank statements?? I feel this is ABSOLUTELY NOBODY'S BUSINESS BUT MY OWN. As long as they have pay stubs that prove my income, what I do with my money day by day is none of their damn business

Please fill me in...................................

Sep 10, 2012 07:57 AM

Kate

Yes,

it helps to look at this from the buyer's perspective. I make over $100k per year.

I am currently trying to close with bank of america. they are asking me to show proof of where $200 deposit came from, where $275 deposit came from, I should produce the check copy for my direct deposit from work- REALLY?? a check copy for a direct deposit!!!

isn't there a limit to the amount of deposit that would tricker this request? like if I have $5000 cash deposit, I can see them asking for proof, or even $1000, I would understand, but $200? This is driving me crazy. The seller's agent is hounding me about removing loan contingency and bank of america wants proof of where a $200 cash deposit came from - WHY?

Apr 17, 2013 02:00 PM

Maz

Hi and thanks for the info, I applyed recently for a loan for my 2nd house, and I got the preaproval then loan officer asked for my checks from my work and bank statement etc. I choose to put 5% down ($(12000) the house is new build in 6 month from now, so I decided to aply as I do not have the $12000 cunnetly showing up in my bank statement as I 'm waiting for my work bouns in about 2 month before the closing and also waiting for my income tax return which will be here in a month.

The question do you think this will be a show stopper for the underwitter?

Please advice should I change to FHA and get the money from Friend and pay him later from my bouns/TAX.

Thanks

Apr 18, 2013 01:59 AM

Why is the Mortgage Lender asking about deposits in my bank account?

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