Down Payment And Closing Costs Required For Home Closing: Cash To Close
If you are a home buyer and need a mortgage, your mortgage lender will need to verify that you have enough down payment and closing costs for the mortgage closing. This is called cash to close. All down payment and closing costs need to be verified funds. Mortgage lenders will require 60 days of bank statements to verify that you did not have any bank overdrafts in the past 60 days and that you have enough cash to close that is sourced. By sourced, all irregular deposits and large deposits that you made in your bank account needs to be sourced and explained. For example, if you had a large irregular deposit from a IRS refund check, the mortgage loan underwriter will need to see the copy of the check from the IRS and the copy of the deposit slip in order for that large irregular deposit to be classified as sourced and for you to be able to use it as cash to close on your mortgage loan closing. If you made an irregular large deposit of $5,000, that cash deposit cannot be considered sourced funds and that $5,000 cannot be used as part of your down payment on your home purchase. All cash deposit is considered non-sourced funds and does not count as sourced funds. Closing costs can be received via sellers concessions towards a home buyer’s closing costs and if there are enough sellers concession, the home buyer does not have to worry about have those closings costs in their bank statements. In the event if the home seller will not give a sellers concession, the mortgage lender can cover part or all of the home buyer’s closing costs by a mortgage lender’s credit towards the home buyer’s closing costs in lieu of a higher interest rate.
Cash To Close
The home buyer’s bank statements will always be scrutinized throughout the mortgage approval process until the mortgage loan underwriter will issue a clear to close. A clear to close is when a mortgage loan underwriter signs off on the mortgage loan and gives the mortgage company the clear to fund the mortgage loan. However, prior to issuing a clear to close, the mortgage loan underwriter will need to verify the mortgage loan borrower’s bank account one final time to make sure that the mortgage loan borrower has sufficient sourced funds. Just because the mortgage loan borrower had enough cash to close on the initial part of the mortgage approval process does not mean that the mortgage loan underwriter will use that bank statement. Bank statements can be requested several times during the mortgage approval process. If the mortgage loan borrower withdrew part of their savings during the mortgage loan approval process and does not enough sourced funds that can be used for the down payment or closing costs, getting a clear to close will be an issue. This is a common problem but there are always solutions when a mortgage loan borrower comes up short with cash to close.
Options When There Are Not Sufficient Sourced Funds
Many mortgage loan borrowers may have enough funds to close on their mortgage loan but the key question is are those funds sourced. Again, cash deposits are worthless and cannot be used as sourced funds. If the mortgage loan borrower for one reason or another taps into his or her savings account during the mortgage approval process and does not have enough funds to close on his or her mortgage loan, there are options. First option is that the home buyer can get gift funds from a family member or relative. Gift funds are allowed if the home buyer gets a gift letter signed from the donor of the gift funds stating that the funds the recipient is receiving is not a loan and that the gift funds will not be paid back after the closing of the home. The donor also needs to provide 30 days of bank statements showing that the gift funds has been sourced in the donor’s bank account and showing the gift funds leaving the donor’s account into the recipient’s bank account. This can be provided by showing the wire transfer leaving the donor’s account and entering the gift recipient’s account. Or the donor can show the copy of the check along with the deposit slip of the gift funds.
Adding Yourself To A Family Member’s Bank Account As A Joint Account Holder
Another way of showing funds is by adding the name of the mortgage loan borrower to a family member’s bank account making that that account a joint account. The way you can use this strategy is if you have a family member who trusts you and is willing to add your name to one of their bank accounts with seasoned funds, you can add your name on their bank account as an authorized/joint account holder and after this has been done, get 60 days of bank statement printouts from the bank teller and have the bank teller date, sign, and stamp every pages of the bank statements.
Related> Gift funds for down payment