If you are looking for a home for sale in DeRidder, you probably already know that you are likely to require a down payment in order to get a mortgage. According to the experts at EXIT Real Estate Consultants, most lenders will require a down payment of around 20%, which can equate to tens of thousands of dollars depending on the price of the house in question.
Many first-time buyers just don’t have that kind of money themselves and so it will be up to parents or grandparents to help. But what happens if you suddenly deposit a large sum of money into your bank account? Will this raise a red flag with the bank, and will mortgage lenders query it too?
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What is Meant by the $10,000 Rule?
It is important to know that any deposit of $10,000 or more in a U.S. bank account is automatically flagged up. The IRS requires all banks and businesses to report such payments by filing Form 8300, which is known as the Currency Transaction Report.
The good news is that as long as the transaction is legal, there is nothing for the depositor to worry about. The reason for the flag is simply to prevent any money laundering or fraud. But can it affect your mortgage application?
What Will Happen During Your Mortgage Application?
When you apply for a mortgage to buy a house, you will need to send in documents to the lender for assessment. This might include pay stubs, tax returns, and bank statements. Should your bank statement show an unusually high deposit, the lender will almost certainly query it and want to know where it came from.
Lenders have a responsibility to make sure that a mortgage is affordable for you and that any money you are using towards the purchase is legitimate. If you are using a down payment that was gifted to you by a loved one, they may require proof by way of a letter to say that the money was indeed a gift and that the donor is not expecting it to be repaid.
If you have deposited the money into your bank account from a different savings account, you will be able to explain this by showing the transfer records but if the money has come from another loan or debt obligation, then it may be harder to explain and it could affect the amount you can borrow.
As mentioned already, if your deposit is legal and explainable, you should have nothing to worry about. The worst that will happen is that it will hold up your mortgage application and you may need to provide evidence as to where it came from.
If you want to avoid such a situation, you should get ahead of the game by making sure any large deposits are made months before your mortgage application is made. This is because lenders will usually only ask for bank statements for the previous three to six months. If the deposit was made before then, it is unlikely to be queried and will be seen as savings.
The IRS requires deposits of more than $10,000 to be reported by lending institutes to prevent money laundering and fraud. In most instances, the report of the deposit is enough and there will not be any further queries. But if a large deposit shows on a bank statement during the mortgage application process it is likely to be queried and the lender will want to know where it came from to ensure that it is not another debt obligation that could make the mortgage unaffordable.
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