When a borrower is pursuing a new mortgage, he must provide proof of funds for the transaction. This is more than simply having the cash available to complete the mortgage down payment; this means having a preset amount of reserves on hand as well. While different lenders have different requirements, there are a few industry standards for proof of a deposit for a mortgage.
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Current Account Statements
In most cases, borrowers provide the lender with two months worth of bank or current account statements to prove that they have the cash on hand to proceed with the mortgage transaction. However, the lender will read through the bank statements and require an explanation for any unusual deposit. Typically, any deposit that is not associated with a borrower's paycheck will require an explanation. A copy of the deposit slip and the deposited check may be required by the lender.
If large cash deposits are recorded on a borrower's current account or are to be used for the down payment, an explanation from the borrower will be required in order for the transaction to be completed. This is to avoid illegal funds being used in mortgage transaction. If the borrower cannot produce a legitimate source for the cash funds, the funds will not be able to be used in the transaction.
If a borrower receives gift funds from a family member, there must be a letter from that family member stating their intent to give the funds to the borrower. Additionally, the family member may be required to produce a proof of deposit for their funds as well. Bank statements, as well as the copy of the check written to the borrower with the associated deposit slip, may be required to complete the transaction.
Net Proceeds From the Sale of Other Property
If the proceeds from the sale of another property are to be used to complete the mortgage transaction, a copy of the HUD statement (closing statement) on the other sales transaction will be required. Additionally, a copy of the proceeds check and the associated deposit slip will be required in most cases.
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