When applying for a home loan, lenders typically require “seasoned funds” for a down payment. Seasoned funds refer to money that you have possessed for a certain period of time, commonly 60 days [1]. This requirement ensures that the funds are yours and not borrowed from someone else [2].
Key Facts
- Seasoned Funds: Lenders typically require “seasoned funds” for a down payment on a home loan. Seasoned funds refer to money that you have possessed for a certain period of time, commonly 60 days.
- Two Months’ Worth of Bank Statements: When applying for a home loan, lenders usually ask for at least two months’ worth of bank statements. This is to ensure that you haven’t recently borrowed money or taken out a loan to qualify for the loan.
- Sourcing and Seasoning: Underwriters, who evaluate and approve mortgage applications, want to see that the funds in your bank accounts are yours and not borrowed from someone else. They require the funds to be “sourced and seasoned.” “Sourced” means it’s clear where the money came from, and any unusual deposits are explained in writing. “Seasoned” typically means the money has been in your account for at least 60 days.
- Large Deposits: Large, undocumented deposits in your bank account can raise red flags for lenders. It’s important to provide a clear and documented source for any significant deposits to avoid potential issues during the loan application process.
Two Months’ Worth of Bank Statements
When applying for a home loan, lenders usually ask for at least two months’ worth of bank statements [1]. This is to ensure that you haven’t recently borrowed money or taken out a loan to qualify for the loan [1].
Sourcing and Seasoning
Underwriters, who evaluate and approve mortgage applications, want to see that the funds in your bank accounts are yours and not borrowed from someone else [2]. They require the funds to be “sourced and seasoned” [2]. “Sourced” means it’s clear where the money came from, and any unusual deposits are explained in writing [2]. “Seasoned” typically means the money has been in your account for at least 60 days [2].
Large Deposits
Large, undocumented deposits in your bank account can raise red flags for lenders [3]. It’s important to provide a clear and documented source for any significant deposits to avoid potential issues during the loan application process [3].
References
[1] Rocket Mortgage: https://www.rocketmortgage.com/learn/bank-statements
[2] Experian: https://www.experian.com/blogs/ask-experian/what-is-seasoned-money-for-down-payment/
[3] The Mortgage Reports: https://themortgagereports.com/22079/bank-statements-3-things-mortgage-lenders-dont-want-to-see
FAQs
How long do funds need to be seasoned for a home loan?
Typically, funds need to be seasoned for at least 60 days.
How many months of bank statements do I need to provide for a home loan?
Lenders usually ask for at least two months’ worth of bank statements.
What do lenders look for when reviewing bank statements?
Lenders look for evidence of stable income, sufficient funds for a down payment and closing costs, and no large unexplained deposits.
What are some red flags that can delay or prevent loan approval?
Red flags include insufficient funds, large unexplained deposits, frequent overdrafts, and excessive debt.
Can I use gift funds for a down payment?
Yes, you can use gift funds for a down payment, but you will need to provide a gift letter from the donor.
What if I don’t have enough seasoned funds?
If you don’t have enough seasoned funds, you may be able to qualify for a loan with a higher down payment or a longer loan term.
Can I withdraw money from my bank account after I’ve been pre-approved for a loan?
It’s generally not advisable to withdraw money from your bank account after you’ve been pre-approved for a loan, as this could affect your loan approval.
What happens if I make a large deposit into my bank account after I’ve applied for a loan?
You should notify your lender immediately and provide documentation explaining the source of the funds.