Today, lots of people move money through various online applications and alternative banking products. Venmo, Square and PayPal are among the titans in industry.
(If you want more information on each of the listed services, they are linked in the names).
The mortgage process is challenging as it is, and everyone’s blood pressure rises when the loan officer goes through their bank statements and asks questions about Venmo deposits, or PayPal deposits into your main account. The question alone generally raises everyone’s guard. “That was just money from dinner, I paid, and my friend paid me back.” Or “it’s my Roomate giving me her half of the rent, so I can pay the landlord.” Why? Why does that matter to my mortgage.
Here’s the big deal – the mortgage loan office is seeking to understand your sources of income – all of them, even if we are not using that income for the mortgage loan. Annoying, I know, but rooted in risk management.
If, however, the deposits from Venmo etc. are because you have an EBay business where you occasionally sell something, that may count towards your reserves (given it’s reported correctly to the IRS.) Or we may be able to use it to offset other monthly obligations. For example, if you own a property with another person, and they deposit, via Venmo, half of that mortgage payment monthly – we may be able to count only the portion of the payment you are making. So it could work in your favor. I feel like I have to say this here – this information is not to be construed as tax advice, or advice for your particular mortgage loan application. Please consult a tax advisor, and/or your mortgage loan officer for details on your specific situation.
Here’s my recomendation for how to provide enough detail for the loan office/underwriter to review to make this part of the process as smooth as possible:
Step One: Write a brief LOX (letter of explanation) for the underwriter which details the source of the deposit (i.e. rent money from roommate, reimbursement for vacation house, or sale of your bike on Craigslist).
Step Two: Login to your Venmo account online. (Unfortunately, the app doesn’t allow you to access the information you need.)
Step Three: Under “Account” select “Bank, Cards, and Transactions.”
Step Four: View “Bank Transfer History.”
Step Five: Go to “File” and then “Print” the webpage for the underwriter which shows the history of credits you will need for the underwriter. Be sure the page includes the URL and that you submit ALL pages to the underwriter. They aren’t a fan of you turning in only 3 pages of a four page set. They are always afraid of what could possibly be on that fourth page that you did not submit. (Tip: Print to a PDF so that you can easily email the document to your loan processor or loan office.)
I’ve seen this a few times, fortunately, never in amounts large enough to force me to source the deposits. But I know it’s coming.
Feel free to CONTACT ME if you are interested in getting pre approved for a home loan.