This article explores the implications of such deposits for a loan application and how they can affect the mortgage eligibility of an individual.
To understand the implications of large deposits, one must first understand the components of a mortgage processing and how these deposits may impact those elements. MortgageDepot lays out three main considerations when it comes to large deposits – appraised value, employment/income verification and down payment.
In terms of appraised value, large deposits are considered by lenders because of the potential implications they may have on property values. Deposit amounts above a certain threshold may be viewed as indicative of attempted asset manipulation, something that could potentially hurt the appraisal value of the property itself.
The issue of employment and income verification is also key. Large deposits could indicate attempts to artificially inflate income figures, which could lead to a loan denial due to an inability to verify the source of the deposits. The article also notes that even if deposit sources can be verified, it may still be difficult to ascertain whether an applicant has the capacity to repay the loan.
Finally, the article looks at the down payment, noting that large deposits can also complicate the calculation of down payment requirements. Lenders will want to know the source of the funds and ensure that they are not borrowed from other loans or lines of credit. Additionally, borrowers may need to provide evidence that the funds were not gifted or otherwise provided by another person since this may still be considered a loan of some kind and thus complicate the loan process further.
Overall, this article provides a valuable glimpse into the intricacies of large deposits and their impacts on loan applications. It explains the potential risks associated with large deposits and offers some guidance on how lenders view them in the context of the mortgage processing. As borrowers look to secure a loan or refinance an existing mortgage, this article provides an important reminder to consider the various considerations surrounding large deposits to ensure a successful application.
This article was contributed on Sep 28, 2023