Down Payment From Bank Accounts

The ideal source of down payment funds is a bank account. It does not matter whether the money is in a personal checking or savings account or a money market fund. What matters most is that a borrower can show proof that the money has been there for at least the past two or three months (depending on the lender).

When down payment funds are coming from a bank account, most lenders only require borrowers to submit bank statements dating back either two or three months from the date of the mortgage application. This is unusually enough for a lender to verify the funds. However, although the process is a bit outdated, some lenders still require banks to verify account balances and average daily balances by completing “Verification of Deposit” requests.

Down payment funds are considered “seasoned” funds when bank statements confirm that the funds have been in a borrower’s account for the period of time reflected by the statements. Some lenders require that a down payment be comprised of only seasoned funds.

Lenders become cautious when they see that a large or unusual deposit has recently been made into a borrower’s account. When this is what the verification process reveals, a lender won’t necessarily deny the loan application. But to be approved, a borrower will have to provide a detailed explanation of and substantial documentation regarding the deposit’s origin.