Down Payment and Home Purchase
With the exception of VA loans, most mortgage loan programs require a down payment. When a mortgage loan borrower applies for a home loan, he or she completes a mortgage application and lists his or her income, liabilities, and assets. When a mortgage lender underwrites the mortgage loan, he or she will want to see the source of down payment. If the down payment is not listed in a checking or savings account or other liquid accounts, the mortgage lender will want to know where the source of the down payment will be coming from.
Down Payment Needs to be Sourced
Undocumented sources of down payment like cash cannot be counted. In the mortgage business, cash does not count. Many mortgage loan borrowers think that just because they have cash on hand and not in the bank that they will be able to get a cashier’s check and bring that to closing.
Unsourced Funds Needs to be Seasoned in Bank for 60 Days
If a mortgage borrower has cash and wants to use that cash towards the down payment, that cash needs to be in the borrower’s bank account and seasoned for at least 60 days in order for the mortgage lender to take it into consideration. There are many folks, especially immigrants, who do not trust banks and keep actual cash. It is often known as mattress money. Others in the service and entertainment industry such as bartenders, waiters, waitresses, and hotel workers often receive a portion of their compensation in cash via tips and often do not deposit those proceeds in a bank. With interest rates in savings/checking accounts being almost zero, they feel more secure saving their cash in a safe deposit box or their own personal safe. Unfortunately, those funds cannot be used towards the down payment unless it has been seasoned in their bank accounts or investment accounts for a period of 60 days.
Gift Funds for Down Payment
Down payments can be gifted by family members, however, there must be a paper trail and the funds needs to be seasoned for at least 30 days. For those mortgage borrowers who have family members who are willing to help them with the down payment on their home purchase, the donor needs to provide the mortgage lender with the last 30 days of bank statement or bank statements where it shows the funds has been seasoned for at least 30 days. The withdrawal needs to match the deposit from the donor to the recipient.
Mortgage loan borrowers either have undocumented cash or who are expecting on receiving a gift for their down payment on their home purchase should consult a mortgage broker/banker as soon as possible.