What funds can you use for a down payment on your home loan?

When you buy a house, you typically need to provide a down payment—a percentage of the total cost of the house usually paid by you at closing and not financed in the mortgage loan. Before your loan can be approved, your lender will need to investigate and approve the source of those funds. This is done to ensure your down payment meets the guidelines set for the loan, and to protect the lender’s interest—and yours.

For instance, if you’re applying for a conventional mortgage loan, you may be able to receive money as a gift from a family member, but a gift from a non-family member may not be allowed. You might need to show bank statements, a copy of the check or a letter stating the money is a gift.

Most home loans have guidelines about the source of down payment funds. For example, many conventional mortgage rules require a certain amount of the down payment come from your own funds, and they have a specific way of defining what they call “your own funds.” Your lender will likely look for a paper trail documenting the existence and source of the funds. If you’ve been setting aside 10 percent of your paycheck to save for the down payment, that will be obvious in the paper trail. If you borrowed the money last week, that, too, will be obvious.

If you are a first-time homebuyer, there may be programs to help you with the down payment. Ask your Mortgage Loan Officer for advice on the programs for which you may be eligible.

Your down payment can come from multiple sources, as long as you provide the proper documentation. Check with your Mortgage Loan Officer for advice specific to your situation. Some possible sources of money for your down payment include:

  • Money you’ve saved over time or assets you’ve liquidated.
  • Gift funds from family. Before you count on gift funds, check with your Mortgage Loan Officer to make sure the loan for which you are applying allows gift funds to be used as a down payment. They can also advise you on what you will need to provide to document your gift funds.
  • Money you have inherited.
  • Federal, state and local down payment assistance programs. Look for grants that do not need to be repaid.
  • Employer sponsored programs


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