This topic contains information on depository accounts, including:
Funds held in a checking, savings, money market, certificate of deposit, or other depository accounts may be used for the down payment, closing costs, and financial reserves. The funds must be verified as described in B3-4.2-01, Verification of Deposits and Assets. Unverified funds are not acceptable for the down payment, closing costs, or financial reserves.
The lender must investigate any indications of borrowed funds. These must be identified differently based upon how the asset account was verified.
Business assets may be an acceptable source of funds for the down payment, closing costs, and financial reserves when a borrower is self-employed and the individual federal income tax returns have been evaluated by the lender, including, if applicable, the business federal income tax returns for that particular business (non-Schedule C). The borrower must be listed as an owner of the account and the account must be verified in accordance with B3-4.2-01, Verification of Deposits and Assets. The lender must perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business. See Section B3–3.2, Self-Employment Income, for additional information on the analysis of a self-employed borrower.
When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits, which are defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan. Requirements for evaluating large deposits vary based on the transaction type, as shown in the table below.
|Transaction Type||Evaluation Requirements|
|Refinance transactions||Documentation or explanation for large deposits is not required; however, the lender remains responsible for ensuring that any borrowed funds, including any related liability, are considered.|
The DU validation service automates the assessment of large deposits. When assets are validated, DU issues a message indicating which large deposits require documentation. Compliance with the DU messages satisfies the requirement for documenting large deposits. See B3-2-02, DU Validation Service
When a Verification of Deposit (Form 1006 or Form 1006(S)) (VOD) is used and depository activity is not included, the lender must verify the source of funds for
accounts opened within the last 90 days of the application date, and
account balances that are considerably greater than the average balance reflected on the VOD.