Seriously, we don’t want to see cash in a mortgage transaction. In fact, we can’t use cold hard cash, but we will need to verify your assets and there are some, like cash, that aren’t acceptable sources for down payment or closing costs. There are other sources, like gifts, down payment assistance or closing cost assistance for eligible first time home buyers that may surprise you!
Depending on your loan type and individual program eligibility for First Time Home Buyer Programs, your down payment requirements for your home loan may vary from zero down to 3.5% or more, if you choose for down payment. We will need to establish where this money is coming from and it will need to be from an acceptable, and verifiable source.
Common down payment and closing cost sources:
- Checking Accounts
- Savings Accounts
- Independent Investment Accounts
- 401K or other retirement plans
- Down Payment Assistance Programs for First Time Home Buyers
- Gift Funds from a relative or closely related party
- Sale of assets (like a car or other verifiable asset)
These aren’t the only acceptable sources of funds for down payment, but are the most common sources of down payment. Each of them have their own requirements for verification. Typically, we can easily verify the first 3 with most recent account statements from our checking, savings or other investment accounts. When it comes to obtaining money from a 401K or other retirement plan for down payment, we will need to know the terms of the withdrawal in addition to verifying the balance with a most recent statement.
A few unacceptable sources of down payment
- Borrowed funds from an unsecured source (cash advances from credit cards or other loans)
- Gifts from sources where we can’t adequately prove a relationship
- Cash – by nature cash is not verifiable and is an unaccepted source of funds
Each person’s cash situation is different and the best place to start is by getting an education surrounding your particular situation and what to do and not to do throughout the loan process. Even if you’re a year away from buying your first home, or your next home, starting to prepare early can prevent hiccups down the road. Contact Carrie now or start the process by completing our online pre-qualification worksheet.
If you’re a first time home buyer and you want to learn more about the process of buying your first home and down payment assistance programs that you may be eligible for as a First Time Home Buyer in Minnesota; attend our Free First Time Home Buyer Class. Our next First Time Home Buyer Class is scheduled for February 9th from 6:30-8PM. Register online now for the Free First Time Home Buyer Class or call 952-808-0042 to register by phone.
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