One of the mortgage underwriting conditions that homebuyers tend to find most annoying is the request to source a large deposit that appears in their bank statement.  Payroll deposits and transfers from other verified accounts will not be questioned, however, miscellaneous deposits that appear in bank statements may draw the attention of the mortgage underwriter.  “Large” is a subjective term, so to clearly define what is considered large, the following guidelines apply…

Sourcing Bank Statement Deposits for Conventional Mortgages

For Conventional Mortgages, only deposits that exceed 50% of the gross monthly income will need to be sourced.

For example, if you have an annual salary of $60,000, your gross monthly income would be $5,000 per month.  This means that only deposits that exceed $2500 would need to be sourced.

Sourcing Bank Statement Deposits for FHA Mortgages 

For FHA Mortgages, the threshold for large deposits is 1% of the sales price.  Add up any non-payroll deposits over the course of a 30 day banks statement.  If these deposits exceed 1% of the sales price then they will need to be sourced.

Sourcing Bank Statement Deposits for VA Mortgages

VA guidelines have no specific rule for large deposits as there is often no down payment required for VA mortgages.  The VA leaves it up to the VA underwriter to use their discretion when analyzing the file. 

Sourcing Bank Statement Deposits for USDA Mortgages

The USDA also has no specific rule as most USDA mortgage closings require no down payment and often no cash at all due from the borrower at closing.  The USDA does encourage the underwriter who is analyzing the file to use their discretion when reviewing any bank statements as large deposits may be an indicator of additional income.  Since one of the key criteria for USDA mortgage approval is the accurate verification of Household Income and to make sure that this income does not exceed the USDA maximum income guidelines, this is something an underwriter will keep an eye on.

How do we source a deposit? 

In order to properly source a deposit, you would need to provide the following…

1) Provide documentation showing the source of the deposit.

• If the deposit was a transfer from another bank account, supply a copy of the bank statement to show the withdrawal.

• If the deposit was from a check received, supply a copy of this cancelled check.

• If the deposit was from the sale of a good, provide a receipt.

 2) Provide a brief Letter of Explanation explaining the source of the deposit.

What if we can’t provide documentation to properly source the deposit?  

If the deposit cannot be properly sourced, the underwriter will back this deposit out of the verified assets.  This could cause a problem if the verified asset total becomes less than the amount you need to show for closing and loan approval.  The key to preventing any deposit from tripping up your mortgage application is to review your bank statements with a loan officer very early in your home shopping process.