What Are Unsourced Funds?

Unsourced funds are funds that have no paper trail where a mortgage loan underwriter cannot source the funds needed to use in the mortgage asset qualification process.  In order to be able to use the funds towards the home buyer’s down payment and/or closing costs on a transaction, the mortgage loan borrower needs to source the funds in his or her bank account.  Mortgage lenders require 60 days bank statements and every deposit on the bank statements is looked at.  Payroll deposits is easy to source because it is a consistent deposit either every week or every other week, however, every deposit greater than $200 needs to be sources.  Every deposit that is irregular is looked at and needs to be sourced.  For example, say there is a large deposit for $1,000.  The mortgage loan underwriter will question where that deposit came from and will need a paper trail.  For example, if the $1,000 deposit was a gambling profit, it will be considered unsourced funds and that $1,000 cannot be used towards the mortgage loan borrower’s down payment or closing costs.  However, if the deposit was from a sale of a car, then the funds can be sourced by providing a copy of the check, bill of sale, copy of title, and deposit slip.

Cash Is Considered Unsourced Funds

There are folks who feel safer in having cash in a safe than parked at a bank.  Unfortunately, cash is considered unsourced funds and cannot be used as assets from the mortgage lender.  There are cases where a home buyer goes to a bank and gets a money order or cashier’s check for the earnest money check.  Unfortunately, this earnest money cannot be used and counted towards the down payment because cash are considered unsourced funds.  Many people offer the excuse that they have gotten a gift of cash from a family member.  Gift funds can be used towards a down payment on a home purchased, however, unsourced funds cannot be used.  Gift funds will need to be sourced by providing a cancelled check from the donor to the recepient and by the donor signing a gift letter.  The donor of the gift funds needs to provide a 30 day bank statement showing that the gift funds has been seasoned in the donor’s account and leaving the donor’s account into the recepient’s bank account.  The donor of the gift funds needs to also sign a gift letter stating that the gift funds is not a loan and the gift funds to the recepient does not have to be paid back to the donor.

Solution To Unsourced Funds

If you have unsourced funds such as mattress money and need to use those funds to use it towards the down payment or other types of deposits that are classified as unsourced funds, the only solution to this problem is to deposit the cash and/or unsourced funds to your bank account immediately and let it season for a period of 60 days.  Remember that mortgage lenders will only require 60 days bank statements and anything prior to the current 60 days bank statements do not need to be sourced.  Cash and unsourced funds are not existent in the mortgage industry.

Gustan Cho


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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