Down Payment Sources

When purchasing a home, down payment requirements can be confusing and maybe a little frustrating. However, when you are clear on allowable down payment sources, the entire process becomes simpler.

Lenders will allow savings from several different sources as well as gift funds and, in some cases, cash you’ve saved at home. Down Payment requirements will vary depending on the lender you choose (i.e., FHA, Fannie Mae or Freddie Mac).

source of Down Payments

The most commonly acceptable down payment sources, with all three lenders include: checking, savings, 401k, stocks, bonds, IRAs, Keogh Plans, trust accounts and the cash value of your life insurance policy.

Gift Funds

A very popular source of down payments are gift funds. While gift funds are acceptable, lenders are very clear about who provides the gift funds. Additionally, no gifts may be received from any one person or organization who stands to gain from the sale of the property. Finally, any gifts received may only be received must be from a:

Relative
Close Friend
Employer
Labor Union
Charitable Organization
Government Agency
Public home ownership assistance entity.

If you have very little savings, both Fannie Mae and FHA allow both the down payment and closing costs to come from gift funds. With the help from gift funds you’ll be able to focus on investing in home necessities such as appliances, furnishings or moving expenses.

In addition to gift funds, FHA and Freddie Mac offer other mortgage professional to explain all of your choices as it may be the difference between buying now or later.

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