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Why do I need to explain my bank deposits?

When buying a home using traditional financing, your bank statements are required documentation.  If there are any large deposits that are not from your job or an income tax refund, social security, or retirement, you may have to explain where those deposits come from.

 

Sourcing large deposits

When you are asked to explain where large deposits come from, it is also be referred to as “sourcing” the deposits.  Usually a large deposit is anything that is 50% or more of your income.  The reason for “sourcing” large deposits is to be sure that the money in your account doesn’t come from a random or unacceptable place such cash or “mattress money”.  For example someone could say, “I have a $1 mill in my account because I sold my tennis shoes for $1mill.”  That person could get their friend to say that they bought the shoes for $1mill, but the money could be from some other unacceptable or illegal activity.  Because these loans are federally regulated, they must follow the federal guidelines.  For more information, contact us.

With over a decade of experience in mortgage financing, Kory Small has been writing articles since opening his mortgage brokerage in January 2021. Originally from Louisiana, Kory has called Houston home for 24 years and serves Houston and the surrounding areas. With a knack for simplifying difficult concepts, Kory focuses on making the mortgage process simple and efficient. Known for clear communication and top-tier service, he works closely with clients and real estate agents to ensure smooth transactions – whether FHA, VA, Conventional, USDA, Jumbo, Non-QM loans (bank statements, DSCR, asset-based, fix-and-flip) or multiple down payment assistance programs across Texas. Outside of the mortgage world, Kory enjoys cooking using his original seasoning blends, producing music, and spending time with family.

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