How to Fund Your Down Payment

Purchasing a home is not as difficult as it used to be. One reason for this would be the ease with which you could be pre-approved for a Florida home mortgage.

Another is the fact that lenders have relaxed certain requirements. For example, the status quo of shelling out at least 20 percent of the purchase price on a down payment doesn’t hold true anymore. Moreover, the standards on where the money you use for this payment are far looser than ever before.

Take a look at the following examples of where these funds may originate from:

Checking, Savings, or Money Market Account
If you already have the cash available in your checking, savings or money market account, lenders will deem you a less risky borrower. The money is considered liquid funds: easily and quickly accessible. It demonstrates that you are financially stable enough to handle paying back the Florida mortgage loan.

Stocks, Bonds, or Mutual Funds
You will need to show all documentation relating to the sale of these stocks, bonds and/or mutual funds. Also keep a deposit receipt if you deposited the funds into your checking or savings account.

Gifts
You may receive a monetary gift from family members to make the down payment on a new house. This would include your parents, siblings, grandparents, and aunts and uncles. You will need to fill out a “gift letter” provided by your Florida home loan lender that states how you are related to the person giving you the down payment gift, the amount of the gift, and possibly the source where the person got the money for the gift and is signed by you and the gift-giver.

Retirement Accounts
Having a retirement account such as a 401k is another way to prove your financial stability and that you have the ability to save money. If you borrow against your 401k for a down payment, it may be counted by the lender as an additional debt and be added into debt-to-income ratio. This may affect how much of a loan you qualify for.

Also, if you cash out part of your 401k, you may have to pay tax penalties. Be sure you’re aware of everything involved in using your retirement account for a down payment.

Sale of Personal Property
You can use the profits from the sale of personal property (such as a car or other valuable items) toward a down payment. You need to have a paper trail to prove ownership, sale and transfer of ownership of the item. Ask your Florida mortgage banker what type of documentation you’ll need for whatever you’ll be selling. Make sure you are paid with something other than cash. A check might be wisest.

Employer Assistance
Some employers will provide assistance to employees when looking for housing because if fosters loyalty toward the company and because employees with a house are less likely to jump around from job to job. Make sure you have copies of all the paperwork to show your lender.

Secured Loans
Usually, you aren’t allowed to borrow money for a down payment. But it is acceptable in a few cases, but it must be secured by an asset, such as another property or even a car (as long as you owned the car free and clear). For instance, you might get a home equity line of credit if you’re planning on renting your old house or if you haven’t yet put your current home on the market and want to start looking for a new home.