Best Practices to Verify Your Clients’ Down Payments

The process of verifying down payments can be time-consuming and can sour the buyer experience. To make the process smoother, it is important for clients to get organized in advance and hold their down payment in a single bank account for a minimum of three months. However, some things must wait until there is an accepted Agreement of Purchase and Sale. The most common sources of money for a down payment are personal savings, gifted funds vs. family loans, self-employed, and cryptocurrencies. Mortgage lenders need to be sure the down payment is from legitimate sources, such as Anti Money Laundering (AML) rules.

Large deposits always need an explanation, and there is no agreed standard minimum transaction requiring a second look. The most important details in this text are that lenders are concerned about deposits over $10,000, whether or not money emanates from a sanctioned country, tax avoidance, and if any part of the down payment or closing costs is borrowed. Additionally, lenders will impute a monthly payment for any part of the down payment or closing costs, typically 3% of the amount borrowed. Additionally, mortgage brokers must organize their documents in such a way that an extremely busy document specialist at the lender can quickly determine what is what. The most important details are that the information presented to a lender must be full, plain and clear, and that all pages in the document package should be numbered. The first page should be a summary document with the total amount of funds needed to verify, and each account should be described by the name of the bank, account type and dollar amount.