What Is Proof of Deposit?

Proof of deposit (POD) is proof that funds have been deposited into an account. The term has two main applications with respect to finances. The first is verification that funds have been deposited into a bank account. This is commonly used when applying for a mortgage to buy a house. The mortgage company will want to see that the borrower has accumulated the necessary reserve amount in order to provide the down payment for the home.

To verify this, the borrower will need to provide proof of deposit to the mortgage company. The proof of deposit can be obtained from the bank.

Key Takeaways

  • Proof of deposit (POD) is required by lenders to show that funds have been deposited into an account.
  • Mortgage lenders will require POD to show that the borrower has sufficient funds to pay the downpayment for a property.
  • Once the funds have been deposited into a bank account, the bank will provide POD to the mortgage lender.

The second application of proof of deposit is to verify that the dollar amount of a check or draft being deposited is correct. Proof of deposit is accomplished when the amount written on the check is compared with the amount on the deposit slip. This is the second step in the check presentation process for payment after checks have been sorted by a reader-sorter machine.

Proof of deposit occurs when the amount written on the check is compared to the amount on the deposit slip.

Understanding Proof of Deposit (POD)

When buying a home, the mortgage lender may ask the borrower for proof of deposit. The lender needs to verify that the funds required for the home purchase are accumulated in a bank account and accessible to the lender.

During times of tight credit, the lender may also want to see evidence of how the funds came to be deposited into the bank account and where the money came from. This is because certain lenders place a limit on the amount of gift money that can be used as a down payment on a house.

Special Considerations

Some lenders may have additional requirements for proof of deposit. Some may request copies of bank statements or a letter from the person who provided any gift money that has been deposited into the account.

A lender may also want to see proof of several months of cash reserve on hand in another account to ensure the borrower can still pay the mortgage if they lose their income stream.

Fast Fact

Some mortgage lenders limit the amount of gift money that can be put toward a down payment for a house. These lenders might also want to see proof of where the money deposited originated.

When dealing with deposits into an account, the proof of deposit process follows after checks have been separated by a sorting machine into either an "on us" category or "on them" category. This proof of deposit procedure is called "check proofing" and is done after the routing and account numbers have been recorded by the sorter.

Without adequate proof of deposit, a lender may refuse to finalize a mortgage or allow a potential buyer to use the funds from the account to pay closing costs on a property.