Inquiring (Banking) Minds Want to Know – Where did you get that money?




They want to know, and if you want the loan you have to tell them – then prove it.

Remember the Patriot Act? It added a second layer of caution and curiosity to banks’ inquiries into where you got the money you’re going to use to purchase your new home.

The banks’ original reason for wanting to know the source of your funds was to assure themselves that the money was not borrowed funds. They’ve looked at your income and liabilities and decided to grant your home loan based on that income and those liabilities. An undisclosed loan might make you a poor credit risk.

Then along came the Patriot Act and paranoia that you might be laundering money for terrorists. You might also be a drug dealer or a human trafficker. That’s why any cash deposit of $10,000 or more must be reported to the government.

There’s no getting around either the bank’s curiosity or the Patriot Act, so plan now to comply.

Here’s how to simplify your life as you prepare to refinance or to choose a new home and obtain a mortgage loan:

First, if you’ve been putting cash aside in a safe deposit box, under your mattress, or in the cookie jar, deposit it in the bank (in increments of less than $10,000) just as soon as you start thinking of buying a home. If you don’t already have a savings account to earmark for the purpose, open a new savings account that won’t be used for anything except your refinance or home purchase.  If you’ve been keeping extra money in your regular checking account, transfer that money into the account 90 days prior to making loan application.

If you plan to sell expensive toys such as a boat or motor home to get down payment funds, do it right away and put that money in the same account. If you’ve waited too long and can’t get the money deposited at least 90 days before making your loan application, document the sale carefully. Here’s how:

  • Hang on to the records of your prior ownership.
  • Keep a copy of the bill of sale signed by both you and the buyer.
  • If you accepted a check or a money order, keep a copy.
  • Make an extra copy of the bank deposit page showing the date of the deposit and the amount that matches the bill of sale.

The bank wants to know where every dollar in your account came from. So be prepared to document any deposit that isn’t clearly identifiable on your bank statement as payroll, Social Security, a store refund, an income tax refund, etc.

Even if you hold a yard sale, document the funds. Keep a copy of the ad or the flyer advertising the sale, then document the proceeds and put them in the bank immediately after the sale. If you’ve taken checks, photocopy them before making the deposit.

Remember: You can never have too much documentation. So keep verifiable records of everything having to do with money deposited to your accounts.

The easiest solution is for you to have your down payment and closing costs funds in a separate account at least 60 days prior to purchasing (or up to 90 days, depending upon the date when your bank prints statements). Then you won’t be required to prove the origin of funds in your other accounts.

Transferring funds:

If you do need to transfer funds from other accounts just prior to closing, be prepared to prove where you got all the funds in those accounts.

One more thing: Make the transfer properly. Do NOT withdraw funds one day and deposit them to the “house account” the next day. Do a transfer through the bank so you have a valid 3rd party record of the transfer.


Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770


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