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Can’t Use Business Funds For Down Payment Without CPA Letter

Can't Use Business Funds For Down Payment Without CPA Letter

CPA Letter For Use Of Business Funds

This is a reminder that lenders do not allow borrowers to use business funds (from any “business account”) towards a down payment or closing costs, unless borrowers can get a letter from their CPA that states the withdrawal will not adversely impact the business. CPAs, however, rarely provide such letters nowadays because of the potential liability.

This is a problem that surfaces time and again with our borrowers who own their own businesses or practices (doctors and lawyers). Funds in any account with a business name on it will be deemed “business funds” even if the account is used for personal expenses.

Borrowers need to be reminded of this, and they need to discuss the source of every penny of their down payment and closing costs with us.

Avoid Business Funds Transfers

Do NOT make any transfers from business accounts. Business accounts are more carefully scrutinized than personal accounts. If any large transfers are traced back to business funds, additional documentation will be needed and added requirements will have to be met. This includes having a CPA write a letter to confirm that the use of these funds will not negatively impact your business.

Many of our self-employed borrowers think they can just dip into business funds as needed when they buy a home. But lenders view business funds differently than personal funds – even if business owners have 100% access to their business funds. This is because businesses often need to hold more funds in general for working capital and the depletion of those funds can threaten the health of the business (the very source of the borrower’s income in the first place).

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Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167