Mattress Money Is A Problem When It Comes To Mortgages

Great advice about why cold hard cash can become a red hot issue when buying real estate. I know that some things in real estate don’t make any sense. Often the things that don’t make any sense are directly related to either the policies of banks or government regulations/laws.

Which is why when it comes to making a HUGE financial decision, it is so very important that consumers seek out and use the services of the appropriate professional!

Big thanks to George Souto in Connecticut for originally writing this article!

Anyone one who has been involved in a Real Estate related field even for a short time has most likely heard the term “Mattress Money”.  “Mattress Money” is simply the colorful slang word for “Cash Funds”, and “Cash Funds” is defined in the Lending Industry as funds which cannot be documented.  If funds cannot be documented, then they cannot be used in a mortgage transaction, which means Mattress Money Is A Problem When It Comes To Mortgages.

This week I had two different Borrower with funds which could not be documented, and as a result were short on funds to qualify for the mortgage.  In one case the Borrower had a fairly large amount of cash in his house, and deposited the funds shortly before finding a house to he wanted to purchase, and talking to me to be Pre-Approved.  The Borrower had more than enough funds to qualify, but without the funds being “Seasoned” (money in the Borrower’s bank account long enough to not show up as a deposit) the funds cannot be used as part of the transaction.  So your question maybe why not wait until the funds are seasoned before producing a bank statement?  The answer is, the Borrower did not mention the funds were from a cash deposit before the mortgage application was put into process and reviewed by an Underwriter.

The second Borrower did not deposit cash, they made a large deposit with a bank check.  So what is the problem with that?  The problem is the source of the funds cannot be proven from a bank check, therefore, considered cash.  If you stop and think about it the bank check does not have the name of the person who purchased the check, or an account number from where the money came from.  This means the money could have come from an unacceptable gift source.  Without being able to do document the source of funds the bank check is considered cash.

In both of these situations, the Borrowers had access to acceptable gift funds.  But if they had not been able to access gift funds to replace their own undocumented funds, they would have been short of documented funds for Downpayment and Closing Costs.

The frustrating thing with both of these transactions, was that I spent a substantial amount of time explaining what not to do, and yet the light bulb did not come for them to realize what they had done and inform me of it.  Both Borrowers considered the money theirs, so therefore, they did not see the problem? 

So what should these two borrowers have done.  The one with the large cash deposit should have been Pre-Approved sooner.  If he had been Pre-Approved earlier in the process, I would have inquired about the source of funds for Downpayment and Closing Cost, and would have instructed him on what to do.

The issue with the second Borrower could have been easily avoided.  All that Borrower needed to do, was to do a bank transfer from one account to the other, OR have written a personal check from one account to the other.  Again if he had told me he was taking the money from one account to the other, we could have avoided the problem.

Borrowers have to be reminded at every turn to not do anything financially without talking to their Loan Originator, and even with all the reminding they still many times create issues.  If funds cannot be documented, they cannot be used in a mortgage transaction.  The funds are considered, cash, “Mattress Money”, and Mattress Money Is A Problem When It Comes To Mortgages.



 Info about the author:

George Souto NMLS# 65149 is a Loan Originator 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

Mark Brian



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