Seasoned Money ............ What Is It???

By
Real Estate Mortgage Broker with George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut NMLS #65149

The term "Seasoning Money" or Seasoned Money" is a very common term in the Mortgage Industry.  A simple definition for what is "Seasoned Money" is that it is a reference to the length of time that has past since funds were deposited in or withdrawn from a Bank Account..

Why is "Seasoned Money" important in the Mortgage Industry?  It is important because if a Borrower is applying for a mortgage, the Lender is going to require that they produce bank statements for a certain period of time.  These days any deposit or withdrawal of funds of $1000 or more, that are not a normal monthly deposit or withdrawal will need to be explained.

This is not a problem if the Borrower can document where the funds came from.  For example they sold a car and can produce a sales slip and copy of the check, or they cashed in some stocks or bonds and can produce the documentation for that.  But most often Borrowers can not produce documentation for these deposits or withdrawals, and stating that they just had it laying around the house is not a good explanation (that is referred to as mattress money).

So what needs to take place if there is a large deposit or withdrawal it needs to be "seasoned" (be in the Borrowers Account ) long enough so that it does not show up as a deposit or withdrawal on the Bank Statements that they need to produce.

Depending on the Loan Program, the length of time to "season" the funds is different.  For example, on Conventional Loans (Fannie Mae, & Freddie Mac backed loan) the time needed to "season" is 31 days, because all that is required for the Borrower to produce is a 30 day bank statement.  Therefore, if the funds have been in the bank account for more that 30 days they will be included in the balance, but not listed in the deposits or withdrawals.  For a FHA Loan, the Underwriter (at least my Underwrite) is going to want to see two months of bank statements, which means that the money needs to be "seasoned" for at least 61 days.  On a CHFA Loan, the Underwriter as well as CHFA usually want to see three months of bank statements so the money needs to be "seasoned" for at least 92 days, since within a three month period there is bound to be a 31 day month.

This all may sound simple, but "seasoning money" produces more problems than you might imagine.  A lot of the times it is because the Borrower got money to purchase the house from someone that would not be an acceptable source for gift money.  Or the person was an acceptable source, but does not want to produce the documents needed to show that it was an acceptable gift.

Please keep in mind that if you are thinking of purchasing a house and are going to be depositing or withdrawing any large sum of money ($1000 or more) that you talk to your Loan Officer first to make sure that it is being done correctly so that you do not run into a problem at the time of the loan.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

 

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Topic:
Lending / Financial
Location:
Connecticut Middlesex County Middletown
Groups:
1st Time Buyers
Connecticut Club
Mortgages
Real Estate Rookie
Realtors®
Tags:
fha mortgage
chfa mortgage
va mortgage
connecticut
middlesex county
middletown
cromwell
portland
durham
middlefield

Comments 18 New Comment

Ambassador
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Jeff Dowler CRS
Carlsbad CA Homes for Sale (760) 840-1360
Solutions Real Estate

George - important info for buyers and their agents. Seems to be the biggest issue with first time buyers who are getting gift money from family. And the time frames seem to vary quite a bit. I like to know what the plans are from buyers up  front rather than waiting until offer time when it can be too late.

jeff

May 17, 2009 10:38 AM
Ambassador
1,709,012
George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Jeff, Realtors can really help out in the loan process if they get information like this up front and eliminate some of the surprises.

May 17, 2009 02:29 PM
Rainmaker
558,639
Chris Olsen
Broker Owner Cleveland Ohio Real Estate
Olsen Ziegler Realty

Hi George -- I have only run into this once so I forgot all about it.  It's amazing how many rules there are and how an exceptional loan officer like you is needed to successfully guide a buyer and help avoid all the pitfalls that are out there.

May 18, 2009 06:20 PM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Chris, we have to constantly be learning and staying on top of things in this business or it can be very costly for clients if we don't.

May 18, 2009 09:15 PM
Anonymous #18
Anonymous
Adam B.

I am going to apply for a RHA loan, and my brother "gifted" me $8000.  Is he an acceptable source for this gift?  Do I need to claim it on taxes if it is discovered in the approval process?  My lender is going to ask for 3 months of statements, should I just wait 3 months until the money is "seasoned"?  Thanks!

June 30, 2009 07:55 PM
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George Souto

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