> ## Documentation Index
> Fetch the complete documentation index at: https://docs.pylon.mortgage/llms.txt
> Use this file to discover all available pages before exploring further.

# Source of Funds to Pay Off Liability

> Provide evidence that a liability being paid off before or at closing is satisfied with acceptable borrower funds so it can be removed from qualifying ratios.

## What this task is

This task collects documentation showing **how a liability being paid off is funded** when the payoff occurs **before or at closing**.
The focus is on verifying that:

* The liability has been **fully satisfied or reduced as intended**, and
* The payoff used **borrower funds from acceptable sources**, not undisclosed financing.

## When this task is required

This task is required when:

* A liability is marked as being **paid off before or at closing**, and
* The loan program allows that liability to be **excluded from the borrower’s ongoing obligations** based on payoff.

It commonly applies to:

* **Installment loans**,
* **Revolving debt**, and
* Other **qualifying liabilities** the borrower plans to eliminate to improve their qualifying profile.

## Why this task is required

Lenders must confirm that:

* The liability is **truly paid off or reduced** to the level used in underwriting, and
* The funds used are **permitted per guideline** (for example, personal funds, sale proceeds, or allowed gifts), rather than **new undisclosed debt**.

This ensures:

* The borrower’s **debt-to-income ratio** after closing reflects **real, sustainable obligations**.
* There is no **double-counting of liabilities** or hidden borrowing that would undermine the risk assessment.

Without clear evidence of payoff and source of funds, the lender may be required to **treat the liability as ongoing**, which can negatively affect eligibility.

## Documents needed to resolve this task

To satisfy this task, provide:

* **Proof of payoff or reduction**, such as:
  * A **paid-in-full letter**,
  * A **final statement** showing a **zero or reduced balance**, or
  * A **transaction history** confirming the payoff amount was credited.
* **Evidence of the source of funds** used to make the payoff, for example:
  * Bank statements or asset account statements showing **available funds and the outgoing payoff transaction**.
  * If proceeds from a **sale or refinance** were used, the relevant **Closing Disclosure** or settlement statement linking those proceeds to the payoff.

These documents allow the underwriter to remove or adjust the liability in the qualifying analysis with confidence that the payoff is both **complete and properly sourced**.