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

By
Mortgage and Lending 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what is "Seasoned Money" is that it is a reference to the length of time that has past since funds were deposited in or withdrawn from a Bank Account..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

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Ambassador
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Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

This is important information and needs to be understood by agents, yes agents, before they write a contract for a buyer/client.

This is one of the questions I ask folks when we are qualifying, i.e., source of funds to close and when was the money deposited????

On more than one occassion, we've had to delay writing a contract for a month or two. 

Just one of those things that agents aren't supposed to understand. 

May 15, 2009 02:51 PM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Lenn ........ LOL

Well I know you understand, and you understand much better than most, but I do have a suggestion.  In stead of holding up doing the contract talk to the Loan Officer.  Many times the Underwriter is willing to approve the loan and condition for bank statements to follow before closing. That sometimes might allow enough time to season the money.

Where the problem arises with the Underwriter is where she has seen the bank statement with the large deposit or withdrawal on it, now she has to ask for an explanation.  Hope that little suggestions is useful to you in the future, but in the end you have to do what you are comfortable with.

May 15, 2009 03:20 PM
Rainmaker
573,788
Neal Bloom
Realtor CRS-Weston FL Real Estate
Keller Williams Properties, Weston FL

George,

That word ...seasoning of the loan....I've seen and heard it many times...some lenders used to let you wait 60 days before you could flip the property and some would say 90 days. Since I haven't seen many investors on this subject lately...I'm not sure how long it is now. But I still don't understand why...is it just to justify someone buying a property dirt cheap or at pre-foreclosure or foreclosure and then turn around and sell it for a profit? Probably...they have to justify how the value went up in such a short time.

May 16, 2009 09:47 AM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Neal, right now FHA has waived their restrictions on change of title within the first 6 months (180 days) on foreclosed properties until June, but still maintains the guideline on all other properties except on property that was inherited.  VA does not have any restrictions, and Conventional is very similar to FHA except that they do not have a wavier on foreclosed properties until June.

Normally only property that was inherited will be allowed to transfer title by a Lender withing the first 90 days.  Everything else has to of been owned for at least 90 days, and if sold before 180 days the Seller has to show proof of improvements to justify the increase in price.  After 180 days they may still require the Seller to show improvements, but usually don't.

The reason for these rules (flip rules) I am told is because many elderly people were being taken advantage of by investors just looking to make a quick dollar, so the government stepped in and established theses rules.  I was not around when they first were made so I am not sure of all the details surrounding them.

May 16, 2009 11:49 AM
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Celeste "SALLY" Cheeseman
RA, CRS, Hawaii Mililani Oahu Real Estate
Century 21 Liberty Homes

This is wonderful information....and one AGENTS DO need to understand for sure. Yeah...seasoning money ...sounds like my bank account during busy...then slow periods lol

May 16, 2009 02:24 PM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Sally, mine is never there long enough to season ........ LOL

May 16, 2009 03:54 PM
Rainmaker
591,122
William J. Archambault, Jr.
The Real Estate Investment Institute

George,

Seasoning is a very big issue. This is a great post.

"This is not a problem if the Borrower can document where the funds came from." is the only thing I'd question, I would have said: This is not a problem if the Borrower can document the funds came from an acceptable source!  Allowable sources differ from program to program.

Seasoning 60 or 90 days may not be enough if your institution issues quartly statements because the deposit shows. Normally the LO can use a VOD or ATM print out to avoid this but not always.

When looking for proper seasoning on your bank statements, anything else that shows can cause a problem.  Regular payments that are not on the 1003 and NSF checks! The payments may not be required on the 1003 or the credit report but if you make them and they show you've got to be prepaid to answer for them, for example if you make your kids car payment. No body cares about paid NSF checks, but if they show on your bank statements they can be a stopper. Some banks show your checks as NSF even when they are covered by a check protection line of credit. If they are on the statement you'd best include a letter of explanation up front.

I would add that the lenders also look at the age of the account that the money came from. If the account is less than a year old, you're most likely going to have to document the original deposit and any unusual deposits since then.

"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."is excellent advice. I would only add don't close old accounts, accounts from your old home until you talk to your LO!

When this started in 1984 or 5 it had nothing to do with lending, it was and still is about money laundering!

Bill

May 16, 2009 04:09 PM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Bill, those were great add-ons to my post.  Thanks for expanding on this.

May 16, 2009 04:28 PM
Rainmaker
454,043
Wendy Rulnick
Destin FL Real Estate
Rulnick Realty, Inc.

George - Thank you for the edification.

May 16, 2009 06:02 PM
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Jennifer Fivelsdal
Mid Hudson Valley real estate connection
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571

George - This was great ,and the comments that followed certainly added to the discussion.

May 16, 2009 07:57 PM
Rainmaker
591,254
Valerie Osterhoudt
ABR, Cromwell, CT Real Estate ~ 860.883.8889
Johnson Real Estate, Inc.

Geroge.. It is amazing how many realtors (not me) and potential buyers (who have spoken to loan officers.. not you) that have NO IDEA what "seasoned money " is.  Thank you for posting this.. maybe someone will pick up on this.

valerie osterhoudt

May 16, 2009 08:50 PM
Rainmaker
325,145
Esko Kiuru

George,

Seasoning of money is an important factor nowadays, as underwriters are scrutinizing everything to the smallest detail. Another thing for us to remind mortgage applicants.

May 16, 2009 09:48 PM
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Wendy you are welcome.

Jennifer a lot of times the comments are better than the post.

Valerie, just about every Borrower that I talk to has no idea about this, and yes many Realtors as well.

Esko, you are right they are looking a bank statements closer then I have ever seen them before.

May 16, 2009 09:57 PM
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
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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
558,659
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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