Why would an underwriter deny money from car sale if bill of sale is provided?

My assumption is that since the transaction was to a relative vs a non-relative he wants more documentation that would support that the sale was in deed a legitimate sale.

This is one of the most abused area's of loan fraud.. undocumented cash deposits being used in the purchase of a home.. Unfortunately, your loan officer should have told you,,, in detail.. what the guidelines are regarding cash deposits.. The underwriter must confirm that the cash deposit is acceptable within lending guidelines.. Selling a car is not a problem.. typically, we get a copy of the title to verify it was your car to sell.. we run the Kelly blue book value to determine that the amount you sold it for was reasonable, and then a copy of the bill of sale, or the new title going into the new owners name.. this typically is all that is required. but in your scenario, because it's a relative.. then it becomes suspicious... and the underwriter will most always ask for further documentation to support you story. if you cannot meet the document request from the underwriter, then most likely, your loan will be denied. I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Something is triggering the underwriters fraud radar. You generally need to prove you owned the vehicle, and proved you sold it to use a recent cash deposit. Try showing more documentation, like retained portion of the title (not sure what you have in Florida), proof of cancelled car insurance, and a blue book printout of the exact vehicle showing the sales price is in the ballpark of what the blue book value was. If they still give you grief, change lenders.

As others are saying, likely because it is a relative who purchased it. If they are willing to document where the funds came from you can probably move ahead. Sometimes they want to know what you'll do for a car with that one gone.

If you're using the funds from the sale of your car to cover all or a portion of your closing costs, then the underwriter needs to verify that the funds (especially from a relative) are from a legit source/transaction. It's the underwriter's job to ensure funds to close are legit funds and are not potential loans. An underwriter may question the transaction if the car was your primary source of transportation...and now you're buying a home. Do you have another car or plan for transportation to get to-and-from work...which will most likely be the primary source of income to pay on your monthly mortgage note? Underwriters consider all things.Also, loans are sold on the back end after a loan closes and if anything comes up that isn't fully documented, it's harder for the lender to sale. Lenders are required to due diligence to avoid possible fraud and/or having to buy back a loan. If you're not using the funds from the sale of your car to cover all or a portion of the closing costs, ask if the underwriter can exclude the funds.Best of luck!!