To make things even more complicated, lenders also require borrowers to submit a Proof of Deposit form (a PoD for short). This little document goes a long way. It verifies that the person getting the mortgage is actually in possession of enough funds for a downpayment on the mortgage itself. But that’s just the intro. Read on the understand how PoDs can be obtained, approved, and properly used for your mortgage needs. Whatever those needs are, Bolt Mortgages will be able to help you figure out the complicated landscape of homeownership and big loans.
What is proof of deposit?
A proof of deposit is evidence of where your funds to make your down payment have come from. The source of these funds is verified through a bank statement. You will usually be required to prove where your deposit has come from when purchasing a home with a mortgage, especially a fixed-rate mortgage. This is because banks will want to make sure that you have the funds to repay the mortgage in full and on time. In order to verify this, they will require you to prove that you have the funds available to make your down payment.
It’s really a kind of insurance that you have the ability to pay the loan off on the timeline set out in its terms. It’s related to but not exactly the same as something like a credit score, which measures your historical likelihood to repay a loan instead of your financial situation at the moment.
What is the best source of funds for providing proof of deposit?
The best source of funds for providing proof of deposit is a savings account. This is because it will be the quickest and most convenient way of providing proof of deposit. A savings account is the most likely accepted source of funds for providing proof of deposit because it is the easiest type of account to verify. All you need is an account balance that’s enough to pay the mortgage downpayment. Your bank will use this information to verify the funds in your account and provide you with proof of deposit.
If you don’t have enough money in your bank account for a PoD, then yes, your mortgage lender may still accept another type of source for providing proof of deposit. But it won’t be as easy as just handing over a savings statement or an ATM receipt. You also need to show that the funds are available and easily liquidated (ready to be used). Each method has different requirements and restrictions on acceptable types and amounts of funding sources, so read on for other possible avenues of locking in mortgage funding via a proof of deposit. Some sources are almost a sure thing, while others are hit-or-miss or completely unlikely to get you a PoD.
Most likely accepted sources of deposit:
This is the most likely accepted source of funds for providing proof of deposit. You can open an online savings account at any bank. You will earn interest on the funds in your account and be able to transfer the money to your mortgage lender whenever you are ready to make your down payment.
Sale of assets
Selling off investments, be them stocks, bonds, properties, or anything of the like, is another reliable way to ensure a PoD. The money is real, even if it’s tied up in the market at the moment. Banks and lenders see this as a reliable marker of a safe mortgage investment. It might be necessary to prove how they can be easily and quickly liquidated, especially if you don’t have a lot of savings to back them up. But assets are still a clear demonstration of wealth that gives banks and lenders security in offering a loan.
Sale of property
Similarly, selling off investment properties can pretty much guarantee a PoD. The safety of a long-term real estate endeavor looks good to investors, especially ones who are thinking about giving you a mortgage for another one! If you’re not a first-time homeowner, the sale of your old house can go a long way in financing your new one. Maybe you’re even downsizing or moving to a cheaper city. That makes the down payment easily payable with the funds from the sale of your old home, even if it’s mortgaged.
Shareholder’s equity is another investment-oriented way to ensure a PoD. It’s essentially another way to prove that you are financially capable of providing the down payment, even if you couldn’t withdraw the exact amount from a savings account in the next fifteen minutes. Equity is another solid way to keep your investments secure and doing good for you outside of the stock market tickers! Just make sure to have a clear liquidation strategy if you plan on using these investments as your primary justification when trying to get a PoD.
While not as personally or market-driven as the other methods, an inheritance is a good way to ensure a PoD. If the inherited money is either there or incoming in a large enough volume to pay the down payment of a mortgage, lenders can be confident in your ability to pay it and continue to pay the mortgage. With the vast legal and financial apparatus surrounding inherited wealth, the loopholes are complicated but well-known, giving lenders confidence in how much money will actually fall into your hands as a potential homeowner.
Gifted deposits from close family
Without the passing of inheritance, even a monetary gift from a close family member can do a good job setting up a PoD. A close relative, like a parent, sibling, aunt, or uncle, would do the trick by giving a large enough gift for a down payment. As you’ll see, a second cousin twice removed dropping an enormous sum in your account might raise some flags, but someone that you share a trusted bond with shouldn’t cause any concern.
Sometimes accepted sources of deposit:
Gifted deposits from distant relatives
There are times when families really are close across the farthest reaches of the ancestral tree, but for the most part, lenders are going to be skeptical if your long-lost brother-in-law provides you with your down payment. If a family member is giving you the funds to start your mortgage process, just make sure it’s clear why they’re giving you the money. As long as it isn’t too out of the blue, lenders should have a clear picture that the money is real, clean, and trustworthy.
The Vegas bachelor party went extremely well for you? You drove through a Native American reservation on a road trip? You put your entire life savings on red? It doesn’t matter exactly where your newfound cash came from if it came from a casino. Lenders are going to be skeptical if you’re trying to make a down payment on a home that is entirely luck-based. It’s not a guaranteed “no,” but if you don’t have any precedent for being a potential homeowner, it could be a good enough reason for lenders to deny you a PoD.
Holding money outside of the country is a tough call. The funds might be real and easily accessible. Maybe you have family abroad or investments across the pond. But the difficulty with verification and the potentially lengthy transfer process will cause some lenders to be less inclined to give a PoD to potential homeowners financing their mortgages from overseas funds. It’s much easier to set up a domestic account in advance with the necessary funding.
Rarely accepted sources of deposit:
Gifted deposit from third party
As mentioned in the discussion of gifts from different kinds of relatives, lenders want to know that money from a gift is trustworthy, guaranteed, and accessible. From your parents, that’s easy to verify. From your cousins, it can get progressively less clear. From your college roommate, then that gets into murky territory. Lenders are unlikely to give PoDs if the money is coming from someone who has never financially supported you or doesn’t have a history of large loans and mortgage work.
Personal loan deposit
Personal loans rarely look good to lenders wanting sure things in their clientele. A personal loan’s high-interest rates and low barriers to entry make for a bad combination on top of the hefty investment of a mortgage itself. As a general rule, if you can’t afford something in your current financial situation, it’s a bad idea to take out a loan to be able to.
Just like these other risky PoD plays, a cash deposit doesn’t look great to potential lenders. Your business might operate in cash, or your family might have passed along a generous gift, but trying to go straight from a briefcase of money to a mortgage won’t be the surest path to a PoD. Don’t launder your money, of course, but if your cash is legitimate, take time to put in safer investments and simpler places to transfer.
Why do you need to prove where your deposit has come from?
You might be wondering why there are so many requirements and paths to getting a PoD in the first place. But the reason is pretty straightforward. A bank just needs to make sure that you have the funds available to make your down payment. They don’t want to offer you a loan and find out you have no ability to make the initial payment, even if you’re credit score and income make you a good candidate for the loan itself. They just require you to prove where your funds will be coming from. That is known as verification of your deposit. Your bank will verify the source of your deposit by looking at a bank statement. It will make sure that you have enough funds in your account to make your down payment. That verification as a form is known as the PoD.
It can actually be good for you as well, especially if you’re already a homeowner. When you’re selling your home ahead of the new property, you’ll probably expect some of the sale’s lump sum to go towards the down payment for your new property. If you can’t make sure that the buyer or their lender are going actually to give you the money they promise, would you really still want to sell to them?
If you’re not a homeowner, you’ll probably want to make sure that the lender will be able to verify your deposit. You don’t want to get into a situation where you have to find the money yourself. If you can’t pay the down payment, you won’t be able to get the loan.
You may also have some other sources of funds for your down payment. A gift from a family member or friend is one of them. It will be good if they can provide proof that they gave it to you, such as a gift letter or bank statement showing that they deposited money into your account.
The PoD is also useful if you are buying with other people and need proof that each person has their own source of funds for their share of the down payment. You should know how much each person will contribute before making an offer on a property, so when it comes time for closing, everyone knows what they are responsible for, and no one gets left with unexpected costs at closing time.
If none of these situations apply to you, then there is no need for this form. You don’t need it when buying with someone who has enough money in their own name and doesn’t need verification of deposit or when buying with someone who doesn’t have any money at all (in which case they would likely not be able to qualify for a loan).
How do you provide proof of deposit?
When you are ready to provide proof of deposit to your bank, you will need to bring a statement of your account balance and a printed copy of your bank statement showing the funds that were added to your account. Your bank will use this information to verify the funds in your account and provide you with proof of deposit. If you’re using one of the less secure methods of payment as discussed, be ready to talk to a manager or mortgage specialist in the bank. They will walk you through the process of justifying your method and either issuing you the PoD or giving you advice on alternatives. If that scares you, though, make sure to get in touch with Bolt Mortgages, where you can get all the mortgage advice and information you need to get it right the first time!
Get proof of deposit for mortgage advice from Bolt Mortgages!
Bolt Mortgages has advice for anyone who needs a mortgage, whether you’re a first-time homeowner or you’re looking for somewhere new! The Bolt Mortgage team can help you find a lender that participates in that program to get a lower interest rate and better terms on your mortgage.
The PoD is a document that shows your lender that you have the funds available to make your down payment and eventually repay your mortgage in full.
There are many types of mortgages, but one of the most confusing parts of getting one secured is the Proof of Deposit. You will have to provide proof of deposit to get any type of mortgage, so knowing where the funds for your down payment are coming from is important. These funds can come from a savings account or some other type of account that is easy to verify. But there are risky places that, despite having the necessary funds, might not pan out. Just make sure that you are prepared to provide a proof of deposit when you apply for a mortgage. No matter what your situation though, Bolt Mortgages will be ready to assist in any step of the process!