Which of the following is a concern related to large deposits in a mortgage application?

Lack of documentation is a significant concern when it comes to large deposits in a mortgage application because lenders need to verify the source of funds to ensure they are legitimate and not tied to any fraudulent activities. When a borrower makes a large deposit that cannot be clearly explained or documented, it raises red flags for the lender. This is crucial because funds that seem to come from unknown or improper sources could indicate potential loan fraud or could affect the borrower’s ability to repay the loan.

Lenders follow strict guidelines and regulations, especially in light of anti-money laundering laws, to ensure that all funds used in a mortgage transaction are documented and verified. If a large deposit cannot be traced back to a legitimate source, it could delay the loan approval process or even result in a denial of the application, as the lender must have assurance that the funds are not coming from illicit activities or that they have not been borrowed in a way that violates loan underwriting requirements.

In summary, lack of documentation pertaining to large deposits is a primary concern for lenders because it is essential to validate the legitimacy of funds in order to mitigate risks associated with fraud and compliance violations.