May 27, 2018

Clients’ Cash Deposits Can Delay Closing

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Clients’ Cash Deposits Can Delay Closing

Home buyers who make cash deposits to their checking accounts that don't come from payroll checks or income tax refunds during the processing of a mortgage likely will face delays in closing, lending experts warn. That's because lenders are required to investigate possible suspicious activity for deposits that are not documented or cannot be explained, slowing down the process.

Scott Sheldon, a senior loan officer with Sonoma County Mortgages, told only money that can be adequately "sourced" can be used in the mortgage transaction. 

"If you are self-employed and show cash deposits, that's OK — so long as you claim those monies as income on your tax return and you 'show' income from a filing standpoint," Sheldon says. 

For example, if borrowers receive money from parents or family members, they will need to document and explain that deposited check to lenders. Sheldon says that buyers may want to avoid making deposits that will need to be explained at least 60 days prior to closing. 

Source: “How Cash Income Can Cost You When Applying for a Mortgage,” (Nov. 18, 2013)

Read more:

Clearing the Closing Hurdles
Common Closing Costs for Buyers
Closing Documents You Should Keep