Why Cash Deposits Can Delay Your Mortgage Approval

One of the biggest surprises for homebuyers is learning that having the money isn’t always enough. Your lender also has to be able to verify where the money came from.

If you’re planning to use money for your down payment or closing costs, it’s important to understand how cash deposits are viewed during the mortgage process.

Why Are Cash Deposits a Concern?
Mortgage lenders are required to verify the funds being used to purchase a home. This helps ensure the money is from an acceptable source and meets lending guidelines.

Here are a few things to know:

Cash doesn’t always leave a paper trail.
Unlike a direct deposit, check, or electronic transfer, cash can be difficult to document. When a large cash deposit appears in your bank account, the lender may ask questions about where it came from.

The source of the money may need to be documented.
If the funds came from selling an item, receiving a gift from a family member, or transferring money between accounts, you’ll likely need documentation to support the transaction.

Not all deposits are treated the same.
Every loan program has different requirements, and what is acceptable for one loan type may be handled differently for another.

What About the 90-Day Rule?
You may have heard that cash must be in your account for 90 days before it can be used to buy a home.

There is some truth behind that idea, but it isn’t a universal rule.

In some situations, funds that have been in your account long enough may no longer require the same level of documentation. However, the exact timing depends on the loan program, your overall file, and your lender’s requirements.

That’s why it’s important not to rely on general advice you find online. Every mortgage file is unique.

Before You Move Money…
One of the best things you can do is talk with your mortgage loan officer before making any large deposits or transferring money between accounts.

A quick conversation can help you avoid unnecessary documentation requests, delays, or complications during underwriting.