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During the mortgage process, your lender will review your bank statements to verify your financial information. Sometimes, they may ask about a large deposit that appears in your account.
This is a normal part of underwriting and happens often.
What Is a Large Deposit?
A large deposit is a deposit that is greater than 50% of your monthly income. Example: you make $10,000 a month, any deposit over $5,000 is considered a “large deposit”
Common examples include:
- Cash deposits
- Transfers from another person
- Venmo, Zelle, or Cash App payments
- Checks deposited into your account
- Sale of a vehicle or personal property
- Gift funds from family
- Transfers between accounts
Why Does the Lender Need It Explained?
Mortgage lenders are required to verify where your funds came from before approving your loan. This helps confirm the funds are from an acceptable source, that the money is not undisclosed borrowed funds, and that your loan file meets federal lending guidelines.
If a large deposit cannot be properly documented, the lender may not be able to use those funds toward your mortgage approval.
If a large deposit cannot be documented, the lender may not be able to use those funds toward your mortgage approval.
What May Be Requested?
Usually, the lender will ask for a short Letter of Explanation (LOX) along with supporting documentation showing the source of the deposit.
Depending on the situation, this may include:
- Copy of a check
- Deposit slip
- Bank statements showing a transfer
- Bill of sale
- Gift letter
- Proof of withdrawal from another account
Your loan advisor will let you know exactly what is needed.
Common Examples
Transfer Between Your Own Accounts
You may need to provide statements from both accounts showing the transfer.
Gift Funds
If someone gifted you money for your home purchase, additional documentation may be required.
Sale of an Asset
If you sold a car, equipment, or another item, the lender may ask for a bill of sale or proof of deposit.
Cash Deposits
Cash deposits can be more difficult to document and may require additional explanation.
Tips to Avoid Delays
- Avoid moving large amounts of money during the mortgage process unless necessary
- Keep records of any unusual deposits
- Avoid cash deposits whenever possible
- Let your loan advisor know ahead of time if a large deposit is expected
- Respond quickly to documentation requests
Final Thoughts
Large deposit reviews are a standard part of the mortgage process and are usually easy to resolve with proper documentation.
The goal is simply to ensure your loan meets lending guidelines and can move smoothly toward approval.
If you have questions about a deposit or need help gathering documents, your UnrealFi loan advisor is here to help.
