What Is a Proof of Deposit (POD)?

Proof of Deposit (POD) Explained in Less Than 5 Minutes

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A proof of deposit shows that you have the funds you plan to use for a large purchase, such as downpayment for a house, and that those funds are from a legitimate source. 

Let’s take a closer look at what proof of deposit is and when you may need to use it. 

Definition and Example of a Proof of Deposit 

A proof of deposit is a document that confirms you have a certain amount of funds in your account from a legitimate source. It’s often used in the mortgage industry as part of a review of a home loan applicant’s financial situation.

  • Alternate name: Verification of deposit 

With a proof of deposit, a mortgage lender can see that you have the money you need to make mortgage payments or cover down payment and closing costs for buying a house. It shows whether the money in your account came from a legitimate source, which helps the lender determine if you can afford mortgage payments. 

If a lender sees regular deposits from your salaried job, they can reasonably expect that income to continue. So they will factor those proven deposits into how much you can afford for a monthly mortgage payment. 

In contrast, if the money is from, say, a gift, the bank will not expect you to receive those deposits regularly. Although a lender may accept a one-time deposit as funds for a down payment or closing costs, it will not use that deposit to calculate how much in mortgage payments you can afford.

Outside the mortgage industry, a proof of deposit may also confirm that the amount of a check aligns with the amount in the account that will be debited, or, in other words, that there’s enough money to cover the check.

How a Proof of Deposit Works

Lenders may ask you to provide proof of deposit in several cases. For example, you may have to provide several months’ worth of bank statements, pay stubs, or W-2s to show regular deposits from your employer. 

Here are some other sources of money you may have to prove:

  • Personal savings: To use your savings for proof of deposit, you’ll likely need several months of bank statements. These statements should show the money being added to your account. Lenders prefer to see money that is “seasoned,” meaning it has been in your account for a longer period of time, so is less likely to be a loan. You may have to write a letter explaining the source of the funds.
  • Property sale: If you’ve sold a property and plan to use the funds for a large purchase like a house, you’ll need to show your bank account that contains them. Documents that prove you owned the property may also be required. 
  • Equity release: If you use the same lender to buy a second home using equity from your first one, you may not need proof of deposit. They might, however, ask you to show that you can pay the mortgage on both properties. 
  • Inheritance: To use the money you received in a will, you’ll likely need to provide documents that state how much you received as well as a bank statement that shows the money in your accounts.
  • Gifts: If you’re using gift money, you’ll have to show a legal agreement that explains the money was a gift and the person who gifted it does not expect to be paid back and that they don’t want a portion of the property. 

Lenders may also accept funds from savings bonds, investments, 401(k)s, and IRAs as well as other sources to be used toward a deposit.

A lender can reject you for a mortgage if the source of your deposits does not meet their requirements. Check with your lender to find out what types of funding sources they accept. 

A Proof of Deposit vs. a Proof of Funds

While a proof of deposit and a proof of funds sound the same, there is a noteworthy difference between the two terms. A proof of funds verifies that you have the funds to cover a certain transaction. It may be a document such as a bank statement or a custody statement. 

With a proof of funds document, the lender will have proof that you, the buyer, have the money you need to complete the transaction. While proof of funds simply shows that there is enough money to make a purchase, a proof of deposit shows whether your funds came from a legitimate source. 

Key Takeaways

  • A proof of deposit proves you have the funds you plan to use to cover a large expense, like make mortgage payments, fund a down payment, or pay closing costs.
  • Personal savings, property sales, inheritances, and gifts are among common sources of funding that may require proof of deposit. 
  • You use a proof of funds to show you have enough cash to make a purchase, and you use a proof of deposit to verify where you got the money from.