When you’re getting ready to purchase a home and need funds for the down payment and closing costs, it’s important that borrowers follow the rules in mortgage lending.
One important factor is the source of funds. Where did the funds for closing come from? Source of funds falls under the Federal anti-money laundering law. In the past and even today to some extent, down payments for houses is a way that some people have laundered money, so the feds want all money for closings verified. Down payments and closing costs cannot be cash; bank statements cannot show large cash deposits; and any large deposits, even by check into any verified bank account, must be sourced.
In other words, borrowers cannot use cash stuffed under their mattress or provided by another party, and deposit it into the bank and then use those funds to close a home loan.
Cash is a killer in the mortgage business. If a large check is deposited into the bank account and is used for closing, that check must be from an employer, tax refund, sale of another property, or a gift from a relative. If the borrower cannot legitimize those large deposits, they are not allowed to be used for closing.
The moral to this story is if you are bringing money to closing, make sure it’s legitimate and if you have questions about closing funds, talk to your lender well in advance. You can always call us at Indigo Mortgage and we can answer questions for you about a mortgage loan or the closing process.