Seasoning funds are used to verify what?

• A. It verifies the property value
• B. The funding source and legitimacy
• C. It measures the seasonality of income
• D. It reduces down payment requirements

Answer: (B)

Seasoning funds focus on where the money for the down payment and closing costs came from and whether that money is legitimate. Lenders want to see that the funds have a traceable, legitimate source and that they’ve been in the borrower’s account for a sufficient period (seasoning) to prove they aren’t borrowed from the seller or created for the loan. This helps prevent fraud and money laundering and ensures the funds can be traced if needed. Documentation often includes bank statements and, if the funds are gift money, a gift letter and proof of the gift’s source. So the key purpose is to verify the funding source and legitimacy. It doesn’t verify property value, measure income seasonality, or directly reduce down payment requirements.