Most loan programs today require some sort of a down payment. Even as low as 3% of the sales price while there are a couple of programs that don’t require a down payment of any sort. Those being the VA home loan program and the USDA program designed for rural areas.

VA loans are restricted to those who have served in the armed forces, as well as a few additional borrowers while the USDA program is an attempt to help populate rural areas and provide financing for those areas that most conventional programs won’t touch in such remote areas.

As well, there are also closing costs associated with getting a home loan. There are one time costs due at the settlement table such as maybe an appraisal or credit report, among others. The other charges, sometimes referred to as ‘recurring’ charges, happen again and again. Things such as interest and homeowners insurance. So, where does someone get these funds? Funds from allowable sources?

Bank Account.

Not trying to be Captain Obvious here, but these accounts will be reviewed by your lender to make sure you have the funds available that you say you do. Lenders also want to see these funds ‘seasoned’ meaning they can’t just suddenly show up. Other than  your paycheck, a seemingly random deposit won’t be eligible to be used.

Retirement Account.

Many retirement accounts allow you to borrow from the account. If you have a 401(k) at your work, ask your employer if the account is eligible to be borrowed against. If so, the lender will have set repayment terms that will be withheld from your paycheck each payment period. Lenders set their own terms as there aren’t any universal 401(k) loan terms. It’s the lender that dictates.

Financial Gift.

You may also be on the fortunate receiving end of a financial gift from a family member or qualified source. There may be non-profit groups that are setup to provide home buying assistance. With a gift, the donors will provide evidence they are providing a financial gift. These funds typically are wired to the settlement agent on the closing date. A signed letter from the donor may also be required.

Asset Sales.

You might also be able to sell an appraisal asset to acquire funds for your down payment and closing costs. An appraisable asset is one where the value can be documented via third parties. Sale of an automobile loan might work for you because there are third party sources that can quote a current market value for the property. It’s important to document both the value as well as the sale. The proceeds must then be matched up with a corresponding deposit in an account you own.

Any of these sources can be tapped into. If you have any questions, be sure to talk to  your loan officer and work out the details in advance.

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