Unsourced Funds

How Underwriters View Unsourced Funds In Mortgage Process

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG How Underwriters View Unsourced Funds In Mortgage Process Was UPDATED And PUBLISHED On March 18th, 2020

How Underwriters View Unsourced Funds In Mortgage Process

Unsourced funds are funds that have no paper trail where a mortgage underwriters 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, borrowers need to source the funds to be used
  • Mortgage lenders require 60 days of bank statements
  • Every deposit on the bank statements is looked at
  • Payroll deposits are easy to source
  • This 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 underwriter will question where that deposit came from
  • Will need a paper trail
  • For example, if the $1,000 deposit was a gambling profit, it will be considered unsourced funds
  • That $1,000 cannot be used towards 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 the 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
  • Cannot be used as assets
  • Cash is viewed as unsourced funds by mortgage lenders
  • 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 is considered unsourced funds.

Gift Funds

What is this Gift 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 canceled check by the donor to the recipient
  • Donors need to complete and sign-gift letter
  • The donor of the gift funds needs to provide a 30-day bank statement showing that the gift funds have been seasoned in the donor’s account and leaving the donor’s account into the recipient’s bank account

The donor of the gift funds needs to also sign a gift letter stating that the gift funds are not a loan and the gift funds to the recipient do not have to be paid back to the donor.

Solution To Unsourced Funds

Borrowers with unsourced funds such as mattress money can find ways of eventually using those funds. If mattress money is the only source of cash to close, borrowers need to deposit the unsourced funds in their bank account as soon as possible. Let the funds season for 60 days. Lenders only require 60 days of bank statements. Any deposits past the 60-day mark will not need to be sourced.

  • 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

Home Buyers or homeowners needing to qualify for a mortgage with a national direct lender with no mortgage overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates has ZERO LENDER OVERLAYS on FHA, VA, USDA, and Conventional Loans. Gustan Cho Associates are correspondent lenders on non-qm loans and bank statement loans for self-employed borrowers.


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