If I wasn’t in the mortgage business, I would think you could just paint somebody’s house on the weekend, and take that cash to put down on a house. Well, it’s not as easy as that when it comes to what the folks approving the loan are looking for.
Bank Underwriters want “sourced” deposits, and telling us that you sold a couple of things on Craigslist is probably not going to work. I figured I would come up with a GOOD list that details how to get money to buy a house.
“Acceptable” Funds for a Down Payment on a House in NC
If you are trying to figure out what sales price you can qualify for, we will need to take about 15 minutes and go through your budget and current finances (We can do this pretty easily over the phone). Let’s say we look at your budget, and you qualify for monthly payments to borrow $300,000. If you have $15,000 saved for your down payment, then you could buy a house priced at $315,000.
When we are looking at the money you’re going to use to buy a house, we are looking at money you’ve saved up. Often times a mortgage lender will say something about “SEASONED FUNDS,”assets and resources that have been in your name for at least 60 days, or Gift Funds. This could include IRA retirement accounts, Life Insurance that has cash value or stocks and bonds.
It can also include assets that you can legally sell, like a motorcycle, your grandmother’s silver, or other items of value that you own. We must establish that you a) own the asset, and then b) that you sold it and deposited that money in the bank (so we call that a paper trail).
Money we can easily use for Closing Costs or Down Payment Includes:
- Money that’s been in a Checking or Savings Account for at least 60 days
- Stocks, Bonds or Mutual Funds in your name and “seasoned” for at least 60 days
- Gifts that we document from family members,
- If you are going to have someone co-sign with you for the home, we can use their money to buy the house.
- IRS Refund money
- Bonus Checks, Relocation checks from your employer
- Proceeds from the sale of a home, or the sale of another asset that we document
- Money that you pull from your IRA or Retirement Account (even if you borrowed it)
- Inheritance or Lottery winnings that we can document
- Down Payment Assistance Program from NC Affordable Housing
- Repayment for a loan – so if you loaned money to a friend or family member, and they repay you that money… and we can get a letter from them that you loaned money to them at some point 2 years ago (for instance) and they are paying you back, this money is generally acceptable. There are DOCUMENTS that we have to be provided for this to work.
What we are not allowed to use is money that you recently pulled out as cash from a credit card, or money you’ve borrowed from a friend or family member. Gifts that you don’t have to pay back, might work for some loan scenarios – but again, they must be documented. The Seller (for instance) will not be allowed to give you a gift for the Down Payment, unless you are related to them.
The Seller or Builder is allowed to contribute funds for closing costs. If you are looking for other ideas on how to get money to buy a house – remember that as the Lender, we are also allowed to contribute funds with reduced fees. In the case of Veterans, there are some programs that allow the Real Estate Agent to cover part of the Veteran’s fees, as well.
Money that we MIGHT be Able to Use But MUST Be Documented Includes:
- Money received from doing odd jobs, paid to you in cash, and not yet reported to the IRS. This includes painting someone’s house, or babysitting (for instance).
- Yard Sale Proceeds
In general, if the deposits for any given month, that are not directly related to a verified job, exceed more than 20% of the monthly gross income from employment, we will be required to “source” the money. So, as an example – let’s say that the Gross monthly income for your household is $70,000 (that’s before taxes). That breaks down to $5833 a month. As long you don’t deposit a total of more than $1453 in a given month – we will not need to know where the money comes from. If you have ONE deposit of $1400 – the underwriter is likely going to ask us to “source” or prove where the money came from. If it was 7 or 8 deposits that accumulated to $1150 – we are not supposed to be required to document it.
The bottom line? We suggest that you document everything, try as hard as possible to have ALL of the funds you are going to need to make a down payment and / or cover your closing costs in the BANK at least 60 days before you apply for a mortgage loan.That’s why we suggest that you talk to us as EARLY in the home buying process as possible! We can tell you if a credit card is going to need to be paid down early – lots of things that can make the actual process of buying a home EASIER!
Another idea forhow to get money to buy a house – WAIT.I know that might sound silly – but honestly, it might be best to find a cheaper place to live for the next 6 months, eat PBJs and run at the park instead of spending the extra cash for a gym membership… just going into EXTREME SAVE MONEY MODE. As others see your sacrifice, you might find that Family wants to help out, even more.
Have more ideas or questions about How To Get Money To Buy A House? Please call Steve and Eleanor Thorne 919 649 5058As Mortgage Loan Officers in Cary, NC – we work with First Time Home Buyers in NC every month who want to know the easiest and best way to buy a house! We offer the best mortgage rates in Cary NC – and we offer First Time Home Buyer Loans that other banks and mortgage companies in NC do not offer.