Is it ok to deposit large amount of cash?

Question

So i am getting pre approved for a conventional loan and am short some cash (30k) , i told my lender i have the 30k in cash (which was a gift), then tells me to deposit the cash into my account  and told me it shouldnt be an issue as far as the irs is concerned. Is he right or am i too cautious?

Jodie Beyer · Answer

@Randy Gutierrez I would be careful about breaking the cash up and depositing it over time. It is illegal to structure your transactions in a manner to avoid required reporting. As a banker, I have seen many accounts closed and loans denied due to this type of activity.

Alecia Loveless · Answer

@Michael Loza Depositing anything will trigger the bank in regards to a mortgage. My bank requested a bank statement showing proof of funds for my down payment for a mortgage and it showed the deposit from the sale of a property which was quite large which triggered them to ask where it came from. I had to show the closing statement from the sale to prove the funds were not a gift.

Randy Gutierrez · Answer

Anything over 10k gets reported, bank will ask for ID and SSN and possibly paperwork to file. You are better off depositing this amount over an extended period of time like 3k every month for 10 months etc.

Andrew B. · Answer

There is two separate issues here.

1. When you deposit more than $10k in cash, the bank will ask you to fill out a form for the IRS. If your cash is legally gained then it wont be an issue, just paperwork. If you cash was legally gained, but you're trying to avoid taxes on it, this could lead to an audit and you will get taxed/fined.

2. Depositing large amounts of cash is bad when you are getting a loan underwritten. Your mortgage broker will ask you for your two most recent bank statements while you are applying for the mortgage. They will ask you to explain any large deposits. You said you are getting pre-approved so this may cause an issue or it may not. All depends on how quickly you find a property and get it under contract.

JD Martin · Answer

If you just show up with a duffel bag and make a $30k deposit the bank will have to report the deposit. If it's already in another bank it shouldn't be an issue one way or the other.

David Kelly · Answer

All large deposits that are on your bank statement will need to be sourced.  When you say gift, who gifted it to you?  Also, there are limitations on the amount of money a person can be gifted towards down payment/closing costs depending on the type of property.  There is also a letter that will be needed to submit to underwriting signed by the person who gifted the money.

Gift Funds

A borrower of a mortgage loan secured by a principal residence or second home may use funds received as a personal gift from an acceptable donor. Gift funds may fund all or part of the down payment, closing costs, or financial reserves subject to the minimum borrower contribution requirements below. Gifts are not allowed on an investment property.

"A gift can be provided by:

• a relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or
• a fiancé, fiancée, or domestic partner.

The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction."- per Fannie Mae guidelines

Jim K. · Answer

Nobody has ever given me tens of thousands of dollars as a gift, so I never worry about sourcing my own duffel bags of cash...LOL. must be nice to have problems like that to worry about.

Jodie Beyer · Answer

That banker has no idea what he is talking about and what he is telling you is illegal. It was my job to find that kind of activity and report it.

Michael Loza · Answer

@Jodie Beyer that is what i am afraid of the most is the structuring, the lender i spoke to told me to “spread out” the deposits month after month and i asked him of the structuring law which he had no clue of what i was talking about.

Michael Loza · Answer

@David Kelly thanks david, i appreciate it

Is it ok to deposit large amount of cash?

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