How banks verify the assets you will use for your down payment and closing costs.

Your Assets

Our lending partners want us to verify the following assets:

Down payment
Closing Costs
Cash Reserves

We verify your funds by obtaining the last two months of your checking, savings, brokerage and retirement fund statements. Lenders require at least five percent of the purchase price to be in your accounts for at least the past two months -- this is known as "seasoning".

Why do banks care that your funds are seasoned? They want to be sure that you have the ability to save, or at least hold onto a windfall should you be lucky enough to receive one. Believe it or not, some people don't have the ability to hold onto their money, and this lack of financial discipline concerns lenders. Furthermore, banks do not want any of your down payment to come from loans or credit cards; by verifying that the funds are seasoned, banks also give themselves time to see if a recent large charge has shown up on your credit card account.

If you have made any large deposits that show up on your past few statements, the lender will want us to verify the source. The general rule is that "if you can't trace it, you can't use it." As long as you can document any large deposits such as bonus checks, or transfers from other accounts, there should be no problem. But if Uncle Louie put $30,000 into your account to "pump up" your bank balance, that will be a problem!

2010 Update on Large Deposits: Let’s say you sing your contract March 1, and then you receive a bonus check from your job for $5,000 on March 15. The source of that deposit will need to be explained even if you are not using it for your down payment. Please make a copy of the check – or any large check -- BEFORE YOU DEPOSIT IT. Even if you will not use the new deposit to cover your down payment and closing costs, be prepared to explain and document the deposit.

If Your Down Payment is Coming from Both Spouses or Partners: As soon as they are in escrow, our clients typically want to round up their down payments from various sources and then move them into one account. That is not the preferred way these days, since every movement of money needs to be documented. The best way to handle this is for each party to liquidate his or her own funds and send his or her own wire or cashier’s check to the title company. Please resist the urge to "even up" with each other until after your escrow is closed. A little known fact: THE TITLE COMPANY WILL ACCEPT MULTIPLE CASHIER’S CHECKS AND WIRES. They would rather get 10 separate wires than have their funding held up by a client trying to document a recent deposit.

It's fine to receive a gift from a family member, but that must be verified in writing as well. Please see me for a copy of my gift letter form.

Lenders generally like to see that you have two to three month of cash reserves available after closing, but it's not a requirement by all banks. I will let you know if that is an issue in your case.