We at Box Home Loans hate having to source these deposits just as much as you do, very frustrating for all. Let us tell you why Fannie Mae—the government sponsored entity that makes up all these rules—requires that we do this.
- First, Fannie Mae wants to make sure that people are putting their own money into a deal. They care about that because their data over the past 70 years has shown them that borrowers are much less likely to default on their mortgage if they put their own money into a transaction (as opposed to using borrowed or gifted funds).
- Second, Fannie Mae wants to make sure that we have accounted for every possible debt that a borrower might have. So they can make an accurate assessment of that person’s ability to repay the loan. Therefore, any time they see funds that show up on a bank statement, they want to make sure that those funds are really yours and that they didn’t come from some hidden loan.
Thus, for those reasons—to make sure you’re putting your own money into the transaction and to make sure you haven’t incurred any new debt, or received any gifts to come up with that money—they require us to document the source of large deposits.
We know, it’s a little excessive, but right now Fannie Mae and the major lenders are reeling from billions in losses over the last few years, and they’re being extra picky about this stuff. If it were up to us, we would only worry about major deposits (ie. those exceeding several thousands of dollars) but unfortunately, we all have to live by those rules right now.