When you’re buying or refinancing a home, all funds used in the transaction must be verified and properly sourced. That includes everything from your earnest money to your down payment, closing costs, and reserves. If a lender can’t verify where the money came from, it won’t count toward your approval.
Let’s break down what acceptable funds actually mean—and what they don’t.
What Are Acceptable Funds?
In mortgage lending, acceptable funds refer to money that can be fully documented and traced to an allowable source. If the funds can’t be verified or sourced, they may be disqualified—even if the money is legitimately yours.
Common Acceptable Sources of Funds:
- Your personal checking or savings accounts
- Gift funds from a relative or approved donor (with proper documentation)
- Proceeds from the sale of a home or other asset
- 401(k) loans or retirement account withdrawals
- Home equity lines of credit (HELOCs)
- Secured loans backed by owned property (like a car or land)
- Business accounts (with a CPA letter and supporting documentation)
- Joint accounts (with a joint access letter if the other party isn’t on the loan)
These sources are acceptable because they can be properly tracked. For example, if the money is coming from your 401(k), your statement and the withdrawal confirmation will serve as acceptable proof of funds.
What Is Considered Unacceptable?
Not all funds are allowed in mortgage lending—even if they seem reasonable. Here are some common sources that are not acceptable:
- Cash deposits from unknown or undocumented sources
- Personal loans from friends, family, or neighbors
- Credit card advances or payday loans
- Unsecured loans with no official documentation
- Recently borrowed money from unverified sources
- Unseasoned transfers or last-minute large deposits
If you deposit $4,000 in cash a week before closing, a lender can’t accept that unless we know where the money came from. The same goes for borrowing $10,000 from a friend and moving it into your account with no paper trail.
If we can’t source it, we can’t use it.
FHA Large Deposit Guidelines
For FHA loans, the rules are very specific. Any deposit larger than 1% of the home’s sales price must be explained and fully documented. This requirement is stricter than conventional loans and can catch people off guard.
Example:
If you’re buying a $300,000 home with an FHA loan, any deposit over $3,000 that appears on your bank statement will trigger questions. You’ll need to show where that deposit came from—whether it’s a paycheck, gift, or sale of a personal asset.
If you’re using an FHA loan in Texas, these guidelines apply regardless of the county, including Dallas, Collin, Denton, and beyond.
Deposits and Transfers
Underwriting will require documentation and/or an explanation for deposits that come from anything other than your employer, the IRS, the VA, or the Social Security Administration.
Don’t move money around – it creates more paperwork.
Underwriting will also require “large deposits” to be sourced. This means that we need two months of bank statements of the account where the money came from – even if it’s your own account. #Annoying. For Conventional a “large deposit” is anything in excess of 50% of the qualifying income. For FHA loans, a large deposit is anything exceeding 1% of the home’s value.
Example: If you transferred $10,000 from a stock brokerage account to your checking account and we’ve reviewed your checking account statements, that $10,000 will need to be sourced by you providing two months of your stock brokerage account bank statements. In a similar fashion, if that $10,000 came from mom or dad, then they have to provide two months of their bank statements showing where the money came from. (See Gift Funds for more details)
Fannie Mae and FNMA Large Deposit Rules
For conventional loans backed by Fannie Mae (FNMA) or Freddie Mac, large deposits are flagged if they exceed 50% of your total monthly qualifying income.
Example:
If your monthly income is $6,000 and a deposit of $3,100 shows up, it will need to be sourced and explained. This rule ensures that your assets are stable and not tied to risky or undocumented sources.
These FNMA large deposit requirements apply to anyone using a conventional loan in Texas or nationwide.
What Is a Large Deposit to an Underwriter?
The definition of a “large deposit” depends on your loan type:
FHA: Anything over 1% of the purchase price
Conventional: Anything over 50% of your monthly income
VA and USDA: Typically follow similar rules, but your lender will confirm exact thresholds
If you’re not sure whether a deposit will be flagged, send your most recent bank statement to the Mortgage Mark team and we’ll review it together.
Acceptable Proof of Funds in Real Estate
You’ll hear the terms “acceptable proof of funds” or “proof of deposit” when applying for a mortgage. These documents confirm that your funds are legitimate and available for use.
Acceptable forms of documentation include:
- Two months of bank statements
- Statements from retirement accounts
- CPA letters confirming business funds are accessible
- Closing disclosures from the sale of a property
- Gift letters from the donor along with their bank statements
If your funds are coming from a joint account, and the co-owner is not on the loan, we’ll need a joint access letter stating that you have full rights to use the money. This is common when a parent is still listed on your account.
Common Documentation Pitfalls
Here are a few common mistakes that can delay your approval:
- Depositing cash shortly before closing without documentation
- Moving money between accounts just before applying
- Using a personal loan as your down payment
- Not seasoning your funds for at least 60 days
- Not getting a gift letter or proof of withdrawal for gifted or transferred funds
If we see activity that doesn’t line up with acceptable sources of capital, we’re required to investigate it. This isn’t to make your life harder—it’s part of federal guidelines under the Patriot Act to ensure that funds aren’t coming from illegal or unverified sources.
What to Know About Business Funds
Using money from a business account is allowed, but extra steps are required:
- You’ll need a CPA letter verifying that the withdrawal won’t negatively impact the business
- You must show 100% ownership or authority to access the funds
- Business tax returns and bank statements may be needed
This is especially common for self-employed borrowers, who often use business reserves as part of their assets. If this applies to you, we’ll walk you through exactly what’s needed.
How to Make the Process Easier
If you’re preparing for closing in Dallas, Texas—or anywhere else—follow these steps:
- Don’t move money around without checking with your lender
- Season funds by keeping them in your account for at least 60–90 days
- Label transfers clearly so the origin is easy to explain
- Avoid credit card or cash advances
- Keep documentation for all major deposits
- Ask us first if you’re unsure where funds can come from
We want to make the paperwork minimal and the process simple. Reach out to our team and we’ll talk through your situation before anything becomes a red flag.
Proceeds From the Sale of a Home
If you’re selling a home to buy your next one, you can absolutely use the equity as your down payment or closing funds. Here’s how to document it:
Option 1: Have the title company wire the funds directly to the new transaction and share a copy of that wire
Option 2: Deposit the funds into your account and provide an updated bank statement showing the transaction
This is one of the most common acceptable sources of capital and helps create a seamless experience especially when both closings are handled by the same title company.
Mortgage Rule About Having a Large Balance in Savings
Some borrowers worry that having too much money in savings might cause issues. Don’t worry! That’s a good thing. However, large, unexplained increases in your account will be flagged.
If your bank balance jumps by $20,000 in a single month, underwriting will want to know why. If it’s from a bonus or tax refund, that’s easy to explain. If it’s a gift or sale of an asset, we’ll need documentation.
A large balance isn’t bad—but a large, undocumented deposit is.
Final Thoughts
At the end of the day, acceptable funds are all about clear documentation and timing. The earlier we can review your bank statements, deposits, and planned sources, the better we can guide you through underwriting with minimal friction.
If you’re not sure whether your deposit qualifies, or if you’re thinking about using retirement funds or selling an asset, give the Mortgage Mark team a call.
We’re here to help you navigate every part of the mortgage process from Dallas and across Texas with clarity and confidence.
When you think mortgage, think Mark.
Mark Pfeiffer
Regional Sales Manager
Loan Officer, NMLS # 729612
(972) 829-8639
MortgageMark@MortgageMark.com