While it might not literally be stashed under your mattress, "mattress money" is a catchall term to describe money saved without a documented paper trail. The money could come from selling a car, a small inheritance, or an outright gift. One might assume that cash is cash, but when it comes to real estate transactions, it's important to understand that the way you save your money is nearly as important as having it in the first place.
One of the most important things lenders look at when evaluating a home loan application is how much money is available for the transaction. You need to be able to prove you'll be able to cover the down payment, closing costs, and cash reserve requirement. This verification is done by reviewing recent copies of bank statements, and if your savings account is short by $5,000, you can't simply deposit your mattress money into your bank account right then to cover the gap.
Lenders must be able to verify the source of the money you're using for the transaction, as they're on the lookout for money laundering and illegal activity. If you've been saving cash at home and you plan to use those funds to buy real estate in the future, move the cash out of the vault (or mattress) and into your bank account ahead of time. This will let the funds "season," i.e., sit in your bank account for a couple months, and the lender will not question where the funds came from. While there's no universal guideline, funds generally should be "sourced and seasoned" for at least 60 days or two bank statement cycles.
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