Cash under the mattress can delay settlement.

We have a family that we are representing at the moment who are buying their first home. They found a house they loved, we put an offer, and the contract was ratified. They were being very careful. They didn't make any large purchases, they made all their payments on time as usual, they didn't want to ruin a good thing. There were a few bumps along the way, as there usually are, but we finally were going to settle. Well, until they deposited cash into their bank account.

Our clients deposited cash they had been saving at home. Not sure if they were necessarily storing it under the mattress, but the point is that they had this money available that they needed to cover their closing costs. What is the harm in that, right? When the lender saw the deposit they requested a letter of explanation where the money had come from. VHDA did not accept their explanation. So even though the money is now sitting in their bank account, they can't use it for closing costs. They will either have to have someone gift them that amount or they will have to wait until their next pay check.

The lesson learned here is that if you are planning to buy a home in the near future and you have money stored in your home that you will need for closing costs or to meet lender requirements--that money needs to be in the bank. Talk to your lender about the best way of depositting that money into an account so it does not raise any red flags. The last thing you want is for something so simple and innocent to delay your settlement or keep you from closing altogether.