The downpayment on a home can start as low as 5% of the purchase price. Less than 20% downpayment must be insured which is an additional cost to the borrower. Regardless of the downpayment amount, those funds are under the scrutiny of anti-money laundering laws. That could mean a lot of paper work for borrowers seeking a mortgage.
Funds can be gifted or partially borrowed on credit, but that's a specific program that has its own process and requirements. Most lenders do not allow for partially borrowed funds. For now we will only discuss the organically saved downpayment.
Applicants must provide detailed statements giving complete transparency to sources of funds. By law, the lender needs to see a three month transaction history of the downpayment savings account(s). Any deposits over a certain amount need to be verified and cross referenced. The account statements must have your identification (name and account number). They can’t be altered in any way. They must be a complete 3 month history and recent to the request.
It’s very normal for downpayment funds to be saved in various ways and location. Even more so if there is more than one applicant. Multiple accounts means detailed transaction histories of all accounts. Most people are not prepared for the amount of paper work involved in tracking downpayment funds in the modern world. Cash on hand and crypto are especially complicated.
Here’s a hack that will save you and the lender time and effort. If you are planning to buy a home, consolidate all the downpayment funds into one account at least 3 months before the purchase. Leave the account alone. Once you make an offer and seek financing, then you may produce a simple statement of the one account. By doing this well in advance, you save time and paper work producing multiple statements and defending large deposits.
Remember, to satisfy the proof of downpayment requirement, you need to show a statement that holds the full downpayment (less your deposit with the offer) PLUS 1.5% of the purchase price for closing costs (legal fees), to confirm you have the funds to close the mortgage.
This process is not specific to any lender, it's in fact law. It's not a personal attack on your trustworthiness but rather a general guideline that applies to everyone. An unorganized accounting and savings method will be time consuming and tedious. Streamline your efforts and sail through your sale!
By: Chad & Patty Southwell ~ Visit Chad & Patty Southwell's Site Here
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