Should you put "mattress money" you have saved to buy a home in the bank before applying for a mortgage?

Michael Jensen, Mortgage and Finance Guru

Edited by Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Updated October 20, 2020

We recognize that not everyone is comfortable keeping their money in the bank. Some people prefer to store their money in a safe in their home or even their mattress. Although where you put your money for safekeeping is your personal decision, it can impact your ability to qualify for a mortgage when you want to buy a home (unless of course you pay all cash).

When you apply for a mortgage, lenders are required to verify the source of funds you use for your down payment. The lender needs to make sure that you have personally saved the funds as opposed to taking out a loan from a friend, relative or other party. If you attempt to use a loan to pay for all or part of your down payment, this may reduce the mortgage amount you can afford or prevent you from qualifying.

Review Down Payment Required to Buy a Home

To confirm the source of your down payment, lenders typically review your bank statements for the prior two months. They check your account balances to ensure that you have sufficient funds to pay for the down payment and review the account for any unusual deposit activity.

If the lender sees a significant one-time deposit into your bank account it may raise a red flag. The lender may ask where the deposited funds came from and how you intend to use the money. Again, this is so the lender can make sure that you have not received a loan that should be included in your mortgage application.

If you deposit a significant amount of money from your mattress or personal safe in the two month before you apply for a mortgage, the lender is highly likely to ask questions about the money. You may be required to provide a letter of explanation or other documentation to explain the source of the deposit.

Even if the funds are from a legitimate source, such as your personal savings from working, responding to the lenders questions may be time-consuming and could potentially delay the mortgage process. This is the last thing you want when you are trying to buy a home. Plus there is no guarantee that your responses satisfy the lender’s requirements.

This is why we recommend that if you have money saved in your mattress or a safe that you want to use for the down payment on a home, you deposit the funds in your bank account at least three months before you apply for a mortgage. That way the funds are seasoned in your bank account for at least three months and there are no significant deposits into your account when the lender reviews your bank statements.

In this scenario you should not be required to provide a letter of explanation or any additional documentation other than your bank account statements. In short, having the money in your bank account eliminates a potential hassle and enables your mortgage process to go more smoothly.

If you cannot wait three months after depositing your down payment funds into your bank account, you may still be able to qualify for the mortgage, but the process is likely to be more challenging. You likely need to work with your lender to create a paper trail that establishes where the money came from, which can be difficult if you are saving the funds in your mattress or a safe.

We want to highlight that down payment and mattress money policies can vary by lender and we are seeing some lenders and programs be more flexible on the source of down payment funds.  For example, the HomeReady mortgage program allows applicants to use mattress money (or cash on hand) for their down payment and closing costs while most standard loan programs do not. 

Your best course of action is to contact multiple lenders in the table below, explain your timetable and understand their down payment policies.  Depending on what you learn and when you want to buy a home you may decide to apply for the mortgage immediately or wait until your down payment funds have seasoned in your bank account. Comparing multiple lenders is also the best way to save money on your mortgage.

Sources

"B3-4.3-20, Anticipated Savings and Cash-on-Hand."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, April 1 2009.  Web.