Without a doubt, the hardest and most misunderstood part of getting a mortgage these days is the evaluation of funds used to purchase a new home. For some people, just saving up for a down payment is the hard part; for others, it’s justifying from where the money came.

It can be a real problem, and the root of the problem was caused by the housing collapse of 2007-2008 when interested parties were contributing money toward the cause of buyers or sellers to complete the transaction and turn a profit.

As a result of these past practices, bank statements have become highly scrutinized. Any deposits that are not a part of regular income have become questionable. Underwriters must know where large deposits come from with supporting documentation. That also means transfers between accounts must be included in the underwriting package in order to get accepted.

A lot of honest and responsible people make saving money a part of their regular deposits from their paychecks in order to get the money together to make the big purchase.

These days, underwriters don’t trust anyone and must follow guidelines to the letter, which means that every allotment made from a paycheck to a bank account is also questioned. What kind of account is it? What is the money going toward? Is a bill being paid from that account that isn’t on the credit report? Is a child support payment being made?

These are just a few things that are possible. That doesn’t mean that they are happening, but due diligence must be done to make sure the facts are apparent. Today’s buyers are usually surprised by the amount of documentation and statements required to get a mortgage approved, and the primary reason is to prevent another housing collapse by any means necessary.

Gifts funds are often given by close friends or family members in order to help someone buy a house. That is all well and good, but again documentation is required. Usually a copy of the donor’s bank statement, a copy of the check and the deposit of the funds must all match.

The issue occurs when the donors don’t want to give their bank statements. This reluctance can ruin a purchase because the funds need to be from the donor, and a 30-day statement must be provided to prove the source of the money. Again, underwriters don’t trust anyone and can’t simply take the donors at their word.

Sometimes buyers make an early withdrawal from their retirement accounts to buy with those funds. The withdrawal is one of the easier things to document because it’s usually just a retirement statement, a deposit check and the deposit itself made into a bank account. Those three items are needed to prove the money’s source.

Buyers need to know these things going on, so they can prepare for what’s to come. Part of the preapproval process includes educating buyers about these things, so they have an idea of upcoming events when they have a ratified contract. That way there aren’t any surprises when it comes time to get the mortgage approved, and the process is smoother for everyone.

Some people say it’s ridiculous that so much must be given to buy a home. I would argue that it’s better to be safe than have another housing collapse.

Jason Turner is a mortgage consultant who blogs at mypreferredlender.net.

Email Jason Turner.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription