Down Payment Sources.

When purchasing a new home one of the biggest items you need to understand is your down payment. There are many different types of mortgage products that offer down payments as low as zero to as much as you feel comfortable with. We will stick with the most common trends for the purpose of this article. Most people will fall into the 3% to 20% down payment range. Your down payment can come from the sale of your existing home, a savings, checking or investment account, a retirement account, a gift from a relative or a business account.What ever the case you need to provide proof of these funds typically for 60 days. If you don’t have proof of 60 days you will need to document where the funds came from.

A gift from a relative.

For example if its a gift from a relative you would need to provide a copy of the deposit into your account and usually an account statement from your donors account showing the transfer. Some times this will very slightly but go ahead and prepare yourself to provide this info to your lender. Also prepare the donor that they two might need to provide proof of their funs.

Self employed business funds.

If you are self employed and taking money from a business account for your down payment you will need to provide a letter from your CPA stating that you have 100% access to this money and it will not have negative impact on your business if you use it. This will also require that you provide 60 days of business statements.

Sale of existing property.

If your using  money from the sale of an existing home you will just need to provide a settlement statement showing the proceeds from that sale. If the home has not sold yet but is under contract you can use a pre closing statement to show the funds and then an actual statement when you close.

Checking or savings account.

Now if you are just using a checking and or savings account to provide the down payment you need to make sure that the money is seasoned or you can prove where it came from. Cash deposits will not work in most cases so I would just rule it out.

Retirement accounts.

If you are using funds from a retirement account they need to be settled for example if you are withdrawing from a 401k or other account you will need to provide a copy of the check, the deposit and the terms of withdrawal from the account. This info is listed on every financial institutions web site. It might be hard to find but it is always there. If your down payment is in stocks or mutual funds you will need to sell those items and show the settled funds in your account.

Alternative methods.

If you had to sell a car or something like that you can provide the listing and bill of sale or something along those lines. Generally speaking you would need to provide some sort of proof you owned whatever item you are selling and a paper trail of the funds received. It would be better to get a check r something other than cash in this case.

Cash on hand.

If you are planning on purchasing a home and you are wanting to use “mattress money” it would be a good idea to go ahead and get that deposited into a bank account 60 days prior. Money that is seasoned or in an account for more than 60 days does not need to be verified and can save you some time and the frustration of having to provide extra documentation. Cash is not king when it comes time to put a down payment on a house so get it in the bank if that’s the case.