Acceptable Sources Of Down Payment For First Time Homebuyers

With the US economy still standing in shaky ground, many Americans are finding themselves in a jam with saving for a home. Many first time home buyers that communicate with us, money saved for a down payment (or lack thereof) is one of the primary reasons they feel like they can’t jump in and buy a home even with cheap mortgage rates and low home prices.

Often people use their tax return money as a source of down payment and since it is that time of year to be thinking about taxes, we thought we’d provide a list of places you may be able to find some additional money for your down payment. Oh, and read this article if you are looking for personal tax write offs to boost your tax return.

Given that many of our readers are first time home buyers we’ve prepared this list from the perspective of getting money for a down payment for an FHA mortgage.

One thing to keep in mind: you will have to show the source of the money you plan to use for your down payment. In other words – no mysterious funds allowed – no mattress money here. Talk to your loan officer in advance of getting any money before you put it into your bank account so that you can do it properly and have an acceptable paper trail.

Allowable sources for down payment:

  • Checking/Savings Accounts/CDs
  • Lease to Own/Rent Credit with Option to Purchase
  • Down payment assistance grants, loans, etc.
  • Interested Party Contributions (subject to limitations)
  • Loan Repayment Proceeds (with appropriate and acceptable paper trail)
  • Corporate Relocation Buyout
  • Relocation Benefits
  • Use of Business Funds (as per policy and if allowed by underwriter)
  • Disaster Relief Grant or Loan
  • Non-Traditional Savings Plan/IDA Accounts
  • Employer Assistance
  • Gifts
  • Gifts-Pooled Funds
  • Gifts of Equity
  • Gifts/Grants from Non-Profit
  • Gifts – Wedding
  • Retirement Accounts
  • Proceeds from Sale of Home
  • Sale of Assets
  • Government Bonds
  • Stocks/Securities
  • Inheritance
  • Trade Equity
  • Land Equity
  • Trust Account
  • Life Insurance Net Cash Value
  • Bridge/Swing Loans
  • Income Tax Refunds
  • Saving Funds to Close
  • Gambling or Lottery Winnings
  • Lawsuits or Insurance Settlements
  • Borrowed Funds Secured by an Asset
  • Financing Concessions
  • Cash-on-Hand

Okay, now you have the list – have you looked at all of these possibilities? If you have questions about where your down payment can come from when getting an FHA loan ask your loan officer before you do anything to make sure you have a plan of attack.