Why does the lender care about where my down payment money came from?

Why does my lender need to know where my down payment came from?

Your lender wants to know where your down payment money came from to meet federal lending requirements and verify the funds are legitimate. Mortgage regulations require lenders to document that down payment money comes from acceptable sources and wasn't borrowed without disclosure.

Lenders typically accept down payment funds from your bank accounts, retirement accounts, gifts from family members, or employer assistance programs. The documentation process involves providing bank statements, gift letters, or other proof showing where the money originated and how it moved to your accounts.

What to check: Review your Loan Estimate for any down payment requirements, and gather statements for accounts holding your down payment funds. Large deposits that appeared recently may need additional explanation.

Common paths people use include providing two months of bank statements, writing gift letters for family contributions, or documenting the sale of investments or other assets. The lender walks through exactly what documentation your specific situation requires during the application process.