Sourcing a Deposit

By
Mortgage and Lending with First Heritage Mortgage NMLS #: 938761

Has the Underwriter Asked You To Source a Deposit?

One of my most recent clients who bought a home in Richmond VA was self-employed.  Because of the nature of her business, she made several large deposits into her bank accounts throughout the month.  The deposits were payments from clients.  Since they were large and not payroll, the underwriter requested that she “source” the deposits.

What Does “Sourcing” Mean?

In the mortgage industry, “sourcing” simply means to explain where funds came from (usually with a letter of explanation) and provide documentation to support the explanation.  Here are a few examples of deposits you may need to source:

  • Money from the sale of an asset (purse on eBay, car, etc.)
  • Bonus check
  • Birthday check from Grandma

How To “Source”

Sourcing a deposit requires the following two steps to be completed:

1) Write a simple letter of explanation.

2) Provide documentation substantiating the deposit.  Here are some examples: cancelled check, pay stub, bank statement, receipt of sale of goods.

An Ounce of Prevention

Sourcing deposits for underwriting can be a headache if you have a lot of them.  In order to keep your work to a minimum during the underwriting process, avoid making large deposits into your bank account.  If you are two bank statements away from closing on your house, you could also move all of your funds for closing into one bank account.  Keep this bank account void of any deposits other than payroll, and you will save yourself a lot of trouble, letters of explanation, and rounding up cancelled checks for your loan officer or processor.

Communication Is Key

The best advice I have for my clients is to always communicate your loan officer.  If you don’t know what to do with a deposit or are questioning whether or not to move funds from one account to another, then you should reach out and ask your loan officer for advice.  I think sometimes clients worry about bothering us, but we would much rather you call or email us with a question so that we can avoid an underwriting nightmare or a delayed closing.  It’s our job to advise you on the best way to manage your assets for your home purchase during the mortgage process.

Comments (12)

Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is very good advice for prospective mortgage borrowers. 

Have a most productive spring.

Apr 29, 2014 06:16 AM
Whitney Watson
First Heritage Mortgage - Henrico, VA

Thank you, Roy!

Apr 29, 2014 06:21 AM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Great post and something that you and I deal with on a daily basis. Many times sourcing has been a challenge and it won't get easier any time soon.

Thank you for commenting on my post.

 

Apr 29, 2014 06:43 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Hi Whitney,

I like your explanation..makes sense!! Thanks for stopping by my post today!

May 01, 2014 12:21 PM
Robert Vegas Bob Swetz
Las Vegas, NV

Hello Whitney ... Vegas Bob sees you have joined some new groups! Wonderful and I wish more AR members were as enthusiastic as you ... After reading your words within your post, I see "Success" and your post has been featured to the group:

SUCCESS AT ACTIVERAIN

VB

May 01, 2014 06:18 PM
Whitney Watson
First Heritage Mortgage - Henrico, VA

Joe and Dorie- Thank you for stopping by!

Vegas Bob-Thank you for your words of encouragement! I really appreciate you featuring my post! Have a great weekend!

May 02, 2014 03:49 AM
Kristin Hamilton CA Realtor
Sun Lakes Realty - Banning, CA
(909) 557-6966- Specialize 55+ Communties Banning

Hi Whitney,

I had a buyer who did taxes in a diverse area and had a lot of cash deposits. The underwriter was so upset but she had books for her business. She had enough money in her accounts to pay cash but wanted to get the write-off of a loan. The lender almost didn't fund the loan as he thought she was doing something suspicious. She had a business license with the city for 5 years and finally they were convinced and let the funding wire go through. I was so glad as she wanted the house so bad. I know they must check but it is very hard on buyers who do a lot of cash business. Great post Whitney.

May 02, 2014 03:00 PM
Robert Vegas Bob Swetz
Las Vegas, NV

You are so very welcome and keep them coming ...

VB 

May 03, 2014 02:00 AM
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent

I've got a buyer who runs a carnival food business.  Talk about difficult to source. lol

May 03, 2014 08:52 PM
Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Whitney: This is an excellent post on a topic that is not discussed too often. The last thing consumers want is underwriting issues so following your advice would be very prudent.

May 03, 2014 08:57 PM
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Whitney, "Sourced" deposits almost always comes up several times each year and while buyers are usually a little frustrated by it, the request is for good reason.  Also, the subject of "seasoned" money comes up.  By the way, I stopped by via Debbie Reynolds shout out to you...welcome to AR! 

May 04, 2014 08:33 AM
Margaret Rome Baltimore 410-530-2400
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Just had to have "mattress money" deposited into a bank so it could be ''seasoned'' for 2 months. Had not heard the term "sourcing".

May 04, 2014 02:04 PM