There are many reasons for odd and sometimes large amounts of cash deposits to show up on your bank statements. And for each one be prepared to explain, as well as show a paper trail and supporting documentation for every nickel. Why? Because you are a drug runner, don’t you know? Or you got a cash advance against your credit card which is a no-no, or you sold your antique collection of Victorian era mannequins without proper invoices and bills of sale.
What in the world am I talking about? I am talking about when you apply for a mortgage, be prepared to document and explain any deposit that is larger amount that is not from a paycheck. The underwriters, courtesy of the rules of the rigid folks at Fannie Mae and Freddie Mac, have to make sure your down payment and closing cost money came from hard earned savings or a properly documented gift. So every larger deposit that is not from a paycheck must be able to be documented with a proper paper trail.
I recently saw my loan processor get an email from a client of mine, and I could tell we were going to have a nightmare on our hands to properly document one bank account. Here is an email from the client, you read it and tell me how much fun it would be to have to document all this:
“On the $3195.75 deposit: a deer ran into our car in late February (the deer didn’t make it, we did!); this was the first of the payments from our auto insurance company for repairs of our car. Past this date, you’ll see another check for $500 and another for $1600 that were for the replacement car seats following the accident and more payment for additional repairs needed on the vehicle.
$20,368.00: $20,000 was a gift from the estate of my husband’s grandfather who passed away late last year. The other $368 was from reimbursement of tuition payments for our son’s preschool (my parents were paying for his preschool tuition this year. We will be paying this coming year).
$1127.25: I cashed in some savings bonds that I’ve had since birth. Most of them were matured or close to it, so we decided to cash them in.
$1089.70: this is my husband’s last paycheck from working at his old job, prior to starting the new job.
$504.26: monetary gifts from the birth of our third son, plus a bit from a freelance editing job I’d done for a friend.”
There must be 25-30 pages of supporting documentation needed to document all this! This is enough to make you want to go live in a straw hut or maybe a cardboard box under an overpass, anything to avoid this kind of paperwork torture.
If you can help it, keep your accounts stable with as little inflow and outflow of money, and your mortgage application will be a lot easier to handle. Otherwise, plan on spending a lot of time standing in front of the copier and scanner!
Tags: underwriting problems