Assets, Your Mortgage File

Large Deposits

One of the things a processor/underwriter is looking for on a bank statement is the presence of large, non-payroll deposits.

Why?  What business is that of theirs?

I’ve had that question shot at me a million times when I attempt to address a deposit on a bank statement. But seriously, why do they care?

That money came from someplace, and underwriters want to make sure it came from an acceptable source.

What does it matter, acceptable or unacceptable?

There are regulations that dictate which types of funds are acceptable for down payment and closing costs. Here are some acceptable funds:

  • Gift from a relative
  • Payroll or funds saved from payroll
  • Secured borrowed funds ( a loan against an auto, or 401K)
  • Funds derived from a sold asset
  • Funds from stocks, or bonds

Here are unacceptable funds:

  • Unsecured borrowed funds. (from a credit card or unsecured loan)
  • Gift from a non-relative
  • Cash saved at home or outside a financial institution

You get the picture. So as you prepare to refinance or purchase a home, remember to watch what goes in or our of your account and speak with your loan originator about the details.bottom



If you are like me, I’m more than happy to take money you are just going to give away, no questions asked. If you are my underwriter, that wouldn’t be the case. You see, assets are a crucial element in analyzing risk so the source of the money used towards a down payment is carefully considered (If you want to know the reason behind this, leave a comment and I’d be happy to blog more about it).

If you are fortunate enough to have a family member provide you with a money, the first thing we are going to question is whether it’s a gift or a loan. A loan would imply that there is a payment.  And a payment would need to be considered in the borrowers debt-to-income.  A gift, however, suggests no repayment and has no strings attached. Our guidelines tell us that gifts can only come from family members since a gift from a non-family member smells

Gift Letter

more like a loan. It may not make sense but again, I just follow the guidelines, I don’t make them.

If the funds are truly a gift, you must produce a letter signed by all parties that details the following:

  • The name and relationship the donor (family member)
  • The donor’s address and phone number
  • The amount of gift
  • Verbiage that clearly states the money is a gift where not repayment is expected

Now, be careful on how you receive the gift. Since everything has to be documented, you can avoid a paper trail by following this advice. Ask your donor to have their bank prepare a certified cashiers check with their name clearly identified as the remiter. Give a copy of this check to your lender and then hold it for safekeeping until your closing date.

Otherwise, if they write you personal check you will need a copy of that cleared check,and  proof it was deposited into your bank account (bank statements).  In some cases, the bank may even want pro of the donor had the funds available to give.

Avoid receiving a gift in cash!  Cash is not document-able and as far as the lender is concerned, unacceptable assets.

*Again, speak with your lender about this subject and get their opinion on the best way to handle a gift. It can vary depending on loan product and more information might be required.  This will at least give you some insight on what the industry typically wants.