Applying for a mortgage can be a nerve-wracking process, and one of the most common mistakes people make is depositing unsourced cash into their bank accounts right before applying. It might seem harmless, but it can raise red flags for lenders and potentially derail your application. In today’s blog we break down why this happens and how you can avoid it.
Pitfall number one: Red flags for lenders. When you deposit a large amount of cash without a clear source, lenders may become suspicious. They’re trying to ensure that the money isn’t from illegal activities or a sudden, unsustainable financial windfall.
Lenders will scrutinize your bank statements and any unusual deposits can prompt questions. They need to verify that your income is steady and legitimate. If you can’t provide documentation for that cash, it could jeopardize your application.
Pitfall number two: Documentation challenges. When you deposit unsourced cash, you’ll need to explain where it came from. This could mean providing a paper trail or written explanations, which isn’t always straightforward.
Maybe it was a gift from a family member, or perhaps you sold a personal item. Whatever the source, you’ll need to document it clearly. And remember, lenders have strict guidelines on acceptable documentation.
Pitfall number three: Delayed application process. The more questions lenders have, the longer the underwriting process can take. If they need additional information about your cash deposit, it could delay your approval, causing stress and potential setbacks in your home buying timeline.
You don’t want to be in a situation where your dream home slips through your fingers because your mortgage approval is held up. It’s crucial to plan ahead and avoid any unnecessary complications.
How can you avoid these pitfalls? Here are a few tips:
1. Keep your finances stable: Avoid large, unsourced cash deposits at least three to six months before applying for a mortgage.
2. Document everything: If you must deposit cash, ensure you have a clear, documented source.
3. Communicate with your lender: If you’re unsure about any deposits, talk to your lender or mortgage advisor for guidance.
By keeping these tips in mind, you’ll be better prepared for a smooth mortgage application process. Whether you’re a first-time homebuyer or looking to refinance, I’m here to help simplify the process and tailor a mortgage solution that fits your needs. Schedule a free consultation today to get started on your journey to owning a home. Together, we can make your homeownership dreams a reality
Sabriyah Callis | NMLS 2537498 | Equal Housing Lender
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