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About Verification of Deposit (VOD)
When you are applying for a mortgage to purchase a new home, there are tons of documents and jargon that you have to go through.
Apart from that, you as a borrower also need to have some money in your account to pay for the down payment that the lender will be required to verify.
In this post, we will learn about the verification of deposits in detail.
What Is A Verification Of Deposit?
Verification of deposit (VOD) has two main purposes when it comes to financing. The first is to make sure the money has been deposited into your bank account. This is often used when applying for a mortgage to buy a home.
Mortgage companies will want to make sure that borrowers have the necessary reserves to pay the down payment on their home.
To verify this, the borrower must provide a VOD to the mortgage company. This can be obtained from the bank. This is also known as Proof of Funds (POF), or Proof of Deposit (POD).
The second meaning of VOD is to verify the exact dollar amount of a deposited check or bill. The deposit is confirmed by comparing the amount on the check with the amount on the deposit slip.
After sorting the check with reader sorting, this is the second step in the process of presenting the check for payment.
When buying a home, mortgage lenders may require the borrower to provide proof of the deposit amount.
Lenders must ensure that the money needed to buy a home has been deposited in a bank account and is handy to the lender during the closing to cover the down payment and closing costs.
In some situations, lenders may want to see evidence of how the money was deposited into a bank account and where the money came from.
This requirement could be lender base as there is a limit of gifts that a borrower can use as a down payment to buy a property.
Some lenders may require additional VOD. Some people may ask for a copy of your bank statement or a letter from the person who deposited money into your account.
Lenders may also want to see evidence of several months of cash reserves in other accounts to ensure borrowers can pay their mortgages even if they lose their source of income.
Without sufficient VOD, the lender may deny the mortgage or allow the potential buyer to use the money in the account to pay the down payment and the closing cost of the property.
How To Obtain A VOD?
The process of obtaining this confirmation is generally very simple and usually requires you to visit your bank or call to request a VOD letter.
The bank may send the letter directly to the lender or may be happy to provide you with a copy.
The VOD letter must be on the bank’s official letterhead. Lenders can also call the bank to make sure the letter is legitimate and that the money is available in the account specified by the borrower.
The VOD will be stored along with the mortgage application for future reference in the loan process.
Why Is VOD Important For The Lender?
Verification of deposits is often required as lenders need to verify that potential borrowers can make the down payment on the property purchased and can prove their monthly ability to pay.
This, combined with your credit score and credit history, can allow lenders to show that borrowers are at low credit risk and more likely to repay the money as agreed.
The lender can reject the loan application on the spot if it discovers that the borrower has lied about the amount of reserves in the application or the existence of a particular account.
Conclusion
Verification of deposit is just standard procedure lenders must follow during a mortgage process. As mentioned above, the lenders would require a letter from the bank holding the account with the funds.
Some lenders might ask for bank statements to verify the available funds. If the funds are coming as a gift, the lenders may require a gift letter form signed by the donor and the recipient that includes details about the gifted amount.
