Question lenders! Will a large cash deposit cause issue w/ loan?

Question

Question for all you knowledgeable & helpful lenders out there!

Over the years, I have a semi-substantial sum of cash saved that I’ve been storing in a safe. Now that I’m looking into purchasing an investment property, I’m considering depositing a large portion of it, if not all, into my bank account so I can have it ready to deploy towards the down payment.

My concern is if I make a large lump sum deposit in cash, it will likely be viewed by the bank/lender as unverified funds and cause a hiccup in the loan process. Have any of you encountered a similar situation like this and how did you navigate forward? Would it be possible to apply these funds towards the down payment without issue once it’s been properly seasoned in my account for 90 days (perhaps with a signed declaration from myself stating it’s origins and that it’s not from an outstanding loan/gift from family?) or would it be denied on the skepticism that it may be a gift from family, outstanding loan, etc?

Thanks!!

Robin Simon · Answer

Generally will depend on the type of lender that you are going with. For a conventional lender / bank / credit union, which are the most heavily regulated and scrutinized, it has a larger chance of being an issue. If you are going with a private / lower doc lender, such as hard money or DSCR, it is less likely to be an issue and likely can be satisfied with a well done Letter of Explanation

Nick Belsky · Answer

@James Viglione

Conventional or agency loans will heavily scrutinize and require 2 months seasoning. Many private or hard money lenders will follow somewhat, but many don't source or season at all. I've had a $60k deposit come in the 3 days before closing, then a screen shot showing the current balance worked. Wouldn't risk it with conventional/agency, but ask your lender for private or hard money. They may be fine with it.

Cheers!

Chris Mason · Answer

This one is pretty easy: Deposit it two bank statement cycles (plus a few days, so if your bank statements go from the 19th to the 19th, deposit it a few days before the 18th and start your two month countdown on the 19th) prior to when you want to get preapproved.

Thanks to the PATRIOT Act (which expanded various laws that had already been on the books at the time), among other things, when you go deposit that >$10k in cash at your bank or credit union, the cashier is going to have to fill out a little form and hand it to law enforcement, FYI. Making individual deposits of <$10k, to be below the threshold, or doing anything else to avoid that form being filled out and turned over to law enforcement, is a distinct crime of it's own, too. Woo!

Mike Klarman · Answer

I believe it would, but I would deposit the money now because most lenders will ask for the most recent statement, so the deposit will show on that next statement you get in early FEB, but come the next statement in early March your beginning and ending balances will see untouched and they'll be no record of any deposit on the statement and no one will even blink an eye. I've had investors send me statements that have 500k+ in them and no one says a word.

Mark Munson · Answer

Hard money lenders only require 2 months of bank statements and some don't look at statements whatsoever. Any deposits over $10k may need to be source by HML, but the extent of that may just be a letter of explanation explaining where it came from. If you seasoning it 30 days and no $10k+ deposits occurred the next two months, then it is a non-issue.

James Viglione · Answer

Very helpful info! Thanks again for sharing your knowledge, Mike!

Mike Klarman · Answer

Anything over 10k and most banks will ask for a LOX - Letter Of Explanation.

In that letter, you will explain that this money is 20 years of savings that was always kept in cash with the purposes of using it in real estate.

Or, deposit the money 5k at a time into whatever account you intend to use for the real estate transaction.

James Viglione · Answer

Thanks everyone who replied for sharing your valuable insight! It appears it will most likely be an issue with the route I’ll be taking (conventional). I’ll talk it over with the lender and see how to proceed.

Lyndsay Zwirlein · Answer

Agree with Nick. This will depend on the lender. Conventional loans require 2 months of seasoning. Non-QM lenders have varying requirements. I would recommend asking your LO before your start the process so you know what to expect and what their underwriters will request!

Question lenders! Will a large cash deposit cause issue w/ loan?

Question lenders! Will a large cash deposit cause issue w/ loan?

Most Popular Reply

11 Replies