Venmo may seem like just a casual way to split the bill at brunch or pay your friend back for those concert tickets, but surprise, surprise—it can actually matter when you’re diving into the wild world of home buying. Let’s unpack why those Venmo transactions might just be more important than you think! Here’s what to know about home buying and Venmo.
Are these transactions paying off secret debt?
When your mortgage lender or underwriter sees a repeat transaction on your bank statement coming from Venmo – they want to know if you have debt you’re paying that they should know about.
Funny story: a client once used Venmo to pay his barber every week. The underwriter wanted to know if it was for some other debt, so he had to write a letter explaining it was for keeping his hair tight and right.
The sneaky world of finance doesn’t always love cash. When you’re ready to buy a house, and you’ve got cash transactions flying left and right, it can raise a few eyebrows in the eyes of lenders and mortgage underwriters. They like things tidy, trackable, and, most importantly, legitimate. Venmo leaves a digital breadcrumb trail for all your payments that are “off the books.”
However, if it’s a recurring charge, they want you to confirm it’s not a secret debt!
How Venmo Can Hurt You
Now, let’s talk about that down payment. Ah, the golden ticket to homeownership! Your friendly neighborhood lender wants to know where that down payment comes from. If you’ve got funds sliding into your account from various sources—say, generous family members or a side hustle—Venmo can help legitimize and clarify those transfers. (or it could do quite the opposite, too….)
You need to note that your family can’t just Venmo you money for your down payment and closing costs. This is a HUGE no-no! While they may want to help you, your mortgage lender must have “gift funds” done a certain way for the money to be legitimate. If your family only has smaller amounts to help you with your home purchase, let them pay for your home inspections, or they can Venmo you AFTER you have closed on your new home! Your lender has to source where those large deposits come from when you transfer it from Venmo.
Also, if you have a side hustle and are paid through Venmo, that’s fine. However, having the accounting to back this up would be best. Make sure you’re keeping records and paying your taxes on this moonlighting gig.
We cannot stress how important it is to talk to your lender about any extra income and folks wanting to give you money to help with your home-buying journey.
Now, go forth, keep Venmo-ing responsibly, talk to your lender, and may your homeownership journey be as smooth as those effortless digital transactions!
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