Understanding Verification of Deposit
A verification of deposit, also known as a VOD, is a document that confirms the existence of a borrower's savings or checking account and the balance in that account. This document is typically required by mortgage lenders as part of the loan application process to verify the borrower's ability to make a down payment and pay closing costs.
The VOD is usually obtained directly from the borrower's bank or financial institution and is used to verify the borrower's assets and income. This helps the lender to assess the borrower's creditworthiness and determine the amount of loan they can afford to repay.
How Verification of Deposit Works
The verification of deposit process typically involves the borrower providing the lender with their bank account information, including the account number and routing number. The lender then uses this information to request a VOD from the borrower's bank, which confirms the account balance and verifies the borrower's identity.
The VOD is usually a one-page document that includes the borrower's name, account number, and account balance, as well as the date the balance was verified. The lender uses this information to update the borrower's loan application and determine their eligibility for the loan.
Importance of Verification of Deposit
The verification of deposit is an important step in the mortgage application process, as it helps to prevent fraud and ensure that the borrower has the necessary funds to complete the purchase. By verifying the borrower's assets and income, the lender can make a more informed decision about the borrower's creditworthiness and the amount of loan they can afford to repay.
In addition, the VOD helps to protect the borrower from identity theft and other forms of financial fraud. By verifying the borrower's identity and account information, the lender can ensure that the borrower's personal and financial information is secure and protected.
Types of Verification of Deposit
There are two main types of verification of deposit: internal and external. An internal VOD is obtained directly from the borrower's bank or financial institution, while an external VOD is obtained from a third-party vendor. Both types of VOD serve the same purpose, which is to verify the borrower's account balance and identity.
In some cases, the lender may also require additional documentation, such as bank statements or proof of income, to verify the borrower's assets and income. This is typically the case for self-employed borrowers or borrowers with non-traditional income sources.
Common Issues with Verification of Deposit
One common issue with verification of deposit is delays in receiving the VOD from the borrower's bank or financial institution. This can cause delays in the loan application process and may even result in the borrower missing their closing date.
Another common issue is discrepancies between the borrower's stated income and assets and the information verified by the VOD. This can raise red flags with the lender and may even result in the loan application being denied.
Frequently Asked Questions
What is the purpose of a verification of deposit?
The purpose of a verification of deposit is to confirm the existence of a borrower's savings or checking account and the balance in that account.
How long does it take to receive a verification of deposit?
The time it takes to receive a verification of deposit can vary, but it is typically received within 1-3 business days.
What information is included on a verification of deposit?
A verification of deposit typically includes the borrower's name, account number, and account balance, as well as the date the balance was verified.
Can I use a verification of deposit from a previous loan application?
No, a verification of deposit is typically only valid for a specific loan application and cannot be used for a subsequent application.
How does a verification of deposit affect my credit score?
A verification of deposit does not directly affect your credit score, but it can impact your loan application and ability to secure a mortgage.
Can I dispute the information on a verification of deposit?
Yes, if you disagree with the information on a verification of deposit, you can dispute it with the lender and provide additional documentation to support your claim.