Side Hustle, Just Married, Sold a Car: Understanding Mortgage Rules for Large Deposits

When applying for a mortgage, it’s essential to understand the guidelines set by Fannie Mae regarding large deposits in your bank account. These rules help ensure transparency and prevent any potential issues during the loan approval process. Let’s break down the key points:

What is Considered a Large Deposit?

A large deposit is defined as a single deposit that exceeds 50% of your total monthly qualifying income for the loan. This threshold helps lenders identify significant inflows of funds that may need further scrutiny.

Documentation Requirements

Purchase Transactions: If you need funds from a large deposit to complete your purchase transaction (e.g., for the down payment, closing costs, or financial reserves), you must provide documentation to show that these funds come from an acceptable source. This ensures that the money used in the transaction is legitimate and traceable.

Refinance Transactions: For refinance transactions, documentation or explanation for large deposits is also required, and same rules apply.

Acceptable Documentation

To verify the source of a large deposit, you can provide various forms of documentation, such as:

• A written explanation from you, the borrower.
• Proof of ownership of an asset that was sold.
• Bill of Sale
• A copy of a wedding invitation to support the receipt of gift funds.

These documents help lenders verify the legitimacy of the funds and ensure they comply with Fannie Mae’s guidelines.

Exceptions to the Rule

There are some exceptions where further explanation or documentation is not needed. If the source of a large deposit is readily identifiable on the account statement (e.g., direct deposit from an employer, Social Security Administration, or IRS/state income tax refund), lenders do not need to obtain additional documentation.

Documenting Side Hustle Income

If you have a side hustle, make sure you document the income in some accounting software or at least a ledger that itemizes the work and pay. This will help you at tax time too. Proper documentation of all income sources ensures that you can provide accurate information to lenders and avoid any potential issues during the mortgage application process.

Additionally, your side hustle should be listed on the loan application. If you have been on the job for less than two years, you most likely won’t be able to use the income to qualify for the loan. However, the money earned can still be used for the down payment.

Getting a Real-Time Rate Quote

For a real-time rate quote with no credit checks, you can visit www.purerate.com/rates. This can give you an idea of the rates available without impacting your credit score.

Why These Rules Matter

Understanding and following these guidelines can help streamline your mortgage application process. By providing the necessary documentation upfront, you can avoid delays and ensure a smoother path to loan approval. Transparency and proper documentation are key to a successful mortgage application.

I hope this helps clarify Fannie Mae’s rules for large deposits! If you have any specific questions or scenarios you’d like to discuss, feel free to reach out. Happy house hunting!

Here is a link to Fannie Mae's Guidelines https://selling-guide.fanniemae.com/sel/b3-4.2-02/depository-accounts

‍