If you are buying a home you obviously need money from somewhere to pay for it. In fact, an important part of making your offer is showing how you plan to finance it. This may even have an impact on whether or not your offer is accepted.
If you plan to pay cash you will need to prove to your seller that you have sufficient funds to close, but you don't usually have to document the source of the funds.
It's different if you are using a mortgage to finance your purchase, however. Mortgage companies require that you verify the source of your down payment by a paper trail, usually of a couple months. If you have the funds in one of your own accounts they will ask for statements of the last months showing that it is there…if you transferred funds from another account during that time they will ask to see the statements from that account…they want to see the money trail.
Many buyers get gift money from family or friends. If that is the case, the mortgage company may ask for the same documentation from whomever is supplying the funds if the gift money showed up in your account within the last couple months or if they will be giving you the money at closing.
You may think this seems to be a violation of privacy, but what is at play here is fraud prevention. They want to make sure there aren't any fraudulent 'side deals' taking place. For one example, the sale price could have been artifically raised $10,000 and seller gave the buyer $10,000 cash without documenting it…providing the funds needed to close the transaction with no money from the buyer. This is illegal and is punishable by law.
Be aware that you will have to provide proof of where the money you will be bringing to closing is coming from…it's for everyone's protection against fraud. In the midst of the current financial turbulence following the money trail is more important than ever.
