When applying for a mortgage loan, you may be asked to explain cash deposits on your bank statements, especially if they are non-payroll deposits over $100. The underwriter requires “source documents” for each of these transactions. But what exactly are source documents? These documents are the original records of a transaction, providing evidence that a transaction occurred.
To help the underwriter understand cash deposits, provide written explanations along with supporting “source” documents. For each transaction in question, include the deposit date, amount, and a description of the transaction. Each document should clearly show the name and address of the other party, date, amount, and purpose of the transaction.
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Examples of source documents include:
- Cash receipts
- 401k withdraw letter
- Cancelled checks
- Other bank account statements
- Customer invoices
- Supplier invoices
- Purchase orders
- Time cards
- Deposit slips
- Notes for loans
- Payment stubs for interest
Be aware that cash deposits for mortgage loans can be challenging to source. The underwriter typically views cash saved at home as “mattress money” and won’t accept it as part of your savings unless it has a clear paper trail. Acceptable source documents for cash deposits may include bank withdrawal slips, ATM receipts, or a bill of sale. However, items like birthday cards or wedding guest lists are not acceptable sources.
The best approach is to avoid making any cash deposits in your bank account from the time you submit your mortgage application until you officially close on your new home. Unverifiable cash deposits may reduce your total available balance, which could impact your ability to meet closing costs.
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