Regardless if you’re seeking a short term private money loan or financing from a conventional source from a bank or mortgage company, you’ll need some sort of down payment to get the ball rolling. Banks will ask for a minimum of 20 to 25 percent down while private funds may ask for up to 50 percent, depending upon the nature of the project.

And unlike when loan applications were reviewed a few years ago, today everything is verified. No more “stated” anything—especially when it concerns the required amount of funds to close.

Your funds are verified by reviewing your bank and investment statements that will be used in your transaction.  The lender will look at your most recent balance and use that amount as verified funds. If you need $50,000 for a $200,000 investment property, the lender looks at the bottom line. But it doesn’t stop there.

Lenders also use bank statements to validate income. For example, say a borrower makes $10,000 per month and takes home $3,500 on the 1st and 15th of the month. The lender will review the bank statements looking for those deposit amounts in your bank account on or about those same dates while at the same time pairing those figures up with copies of your pay check stubs. If everything matches up, your loan application moves forward. If something’s amiss, there’s some explaining to do.

Mortgage lenders want to make sure that all deposits in the accounts are from valid sources. If suddenly a $10,000 amount plops in on the 20th, the lender wants to make sure that $10,000 isn’t a loan from a third party, potentially affecting your ability to repay the debt. Even the smallest, almost insignificant deposits such as $350 from a weekend garage sale may need to be explained.

It may not make very much sense to document the source of a $350 deposit and it might appear to be a bit overboard, but lenders have tightened their reins, and bank statements are part of the new process.