Buying a house can seem complicated, especially when it comes to negotiating and finalizing your mortgage with your lender. Before you finalize your loan, your lender may ask for proof of deposit as a condition of approving your mortgage. This means that your lender may require you to show that you have deposited the required amount for a down payment and closing costs into a specific bank account before they will finalize your mortgage.
When a Proof of Deposit is Needed
Lenders will ask for a proof of deposit to ensure you have the money for a down payment or to show you have the funds necessary for any expected closing costs on a mortgage. The proof of deposit is needed to show the lender that you have the funds to pay the closing costs or make the down payment before the lender will sign off on the final approval of your loan. The proof of deposit shows that you have put any funds you intend to use into a special account to be used to pay the closing costs. This can include money received from the sale of your previous house, a gift from a family member or other cash.
Purpose of a Proof of Deposit
Lenders do not want to be put at risk when issuing mortgages. The proof of deposit serves to reassure the lender that you have enough money in your account to close the loan. Your lender may also ask for a proof of deposit so they can trace the source of the money you use. This is important because some lenders only allow you to use a certain amount of gift money in your down payment or closing costs. If your lender has such restrictions, a proof of deposit allows them to trace where the money you plan on using originated in order to ensure that it meets their requirements.
Providing Proof of Deposit
Usually, providing proof of deposit requires that you give your lender bank statements that show two months' worth of transactions. The statements must show the name of the account holder, the account number, the starting balance of your account, the amount of each deposit made during the two months and the ending balance of your account. Most large banks offer statements online, but you can also go into your local branch office to request your bank statements in person. Your lender may instead ask you to sign a verification of deposit form, which allows your lender to request this information directly from your bank.
Some lenders have additional requirements for providing proof of deposit. For example, you may be required to provide additional bank statements or a letter from anyone who provided you with a financial gift that you deposited in the account. Without adequate proof of deposit, your lender may not finalize your mortgage or allow you to use the funds from that account to pay your closing costs.
Bea is a personal finance and legal writer based in Texas.