Document Large Deposits on a Mortgage

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Documenting deposits ranks as a major pain in the neck for home loan applicants.  In fact, “my mortgage lender needed everything except a DNA sample” came from documenting large deposits (I think).

Arizona Lenders require large unidentified deposits on a borrower’s bank statements be explained and sourced.  Documenting large deposits often seemed like an endless rabbit hole due to one deposit leading to another and so on.  While on the other hand, chasing down cancelled checks and explanation letters to source these big deposits exhausted everyone.

Documenting Large Deposits Eased for Conventional Loans

No, this post is not an announcement ending all deposit documentation (we can dream right?).  However, Fannie Mae announced new rules that ease documenting large deposits.   Central to the “easing” is the new clear definition of what a “large deposit” actually is.

Definition of a large deposit: An unidentified deposit exceeding 50% of gross monthly income.

Now, for deposits meeting that definition, the new rules require:

  • Borrower’s provide written explanation and documentation for the source of the large deposit(s)
  • No explanation or documentation needed if
    • the large deposit source is readily identifiable on the account statement (such as payroll deposits, Social Security Administration, or IRS or State Tax Refunds) and
    • source of large deposit printed on the statement

For Example:

Assume a borrower has gross income of $4,000 per month.  All unidentified deposits on their bank statements over $2,000 are considered a “large deposit”.

On the other hand, all unidentified deposit equal to or less than $2,000 are no longer “large deposits”.   No more documentation needed.  In addition, the funds count as available funds by the Phoenix area mortgage lender. 

This lightens the load for Conventional borrowers with large deposits.  However, Fannie Mae rolled out more good news.  In fact, the announcement has more easements worth checking out.

By Jeremy House

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