U.S. Patriot Act: The Importance of Documenting Large Deposits

The Patriot Act was passed in 2001.  The majority of Americans agreed it was a good idea.  After all, the purpose of the legislation was to identify both foreign and domestic terrorists by tracking the movement of their financials.  What many may not realize is how that has impacted the home loan process.

Lenders will ask for 2 or 3 months of bank statement history for your accounts.  You will find that you will be asked to document deposits into your accounts.  Payroll deposits can be immediately matched up with your monthly income.  However, we all commonly make other deposits into our accounts as well.  A common rule is that all other deposits that are greater than 25% of your monthly income must be sourced, by providing a copy of the check deposited along with an explanation.  This rule can vary based on your loan program and the investor’s guidelines so it could apply for smaller deposits as well.  This will be true for all bank statements that an underwriter reviews, even if the funds are not being used towards your down payment.

Since banks are federally regulated, under the Treasury Departments supervision, they are required to verify that all funds used in a transaction are not terrorist related funds.  The only way to accomplish this is to document the deposits came from another alternate and legitimate source.

If you are considering a home purchase or refinance, be sure to start saving paperwork for deposits that you make into your accounts outside of regular monthly income.  This will save you time and help for a smoother process in obtaining your loan.

If you would like straight forward, comprehensive feedback on the home financing options available, please call Julie Ozanich at 858-369-7510. NMLS#: 479603.

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With a mission to provide a higher standard of mortgage lending services, Julie began her career in mortgage banking in 1990.  To date, Julie has successfully closed over $1 billion in mortgage loans and helped over two thousand customers achieve their mortgage goals.  Program availability may differ slightly in different states.  Terms may vary.  Subject to change without notice. Bank of Manhattan is not affiliated with nor endorses The Carmel Valley Life. NMLS# 401422.