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EQUAL HOUSING
OPPORTUNITY
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Down Payment Information
The amount of funds (cash) you have available for your purchase will affect what types of loans you can qualify for. Down payments typically range from 5 to 30% of the sales price of the property depending on loan programs. The sources for any funds to be used for the down payment or closing costs must be documented to show your strength as a borrower and your ability to repay the loan. Stated asset loans are available at a higher interest rate. Acceptable Down Payment & Closing Costs Sources:
Cash In a Bank Account - Funds must usually be in the account (seasoned) for two months and lenders look at the average of the ending balances, not the deposits.
Mutual Funds / Stocks / IRA / 401K - You can borrow funds from a 401K or make a withdrawal from an IRA but be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.
Gift Funds - Parents and other immediate family members are allowed to give you a gift of money for a portion or all of your down payment depending on the lender.
Equity From Another Property - You can use the proceeds from the sale or refinance from another property for your down payment and closing costs.
Effective for the 2007 tax year, a new tax deduction will allow purchase loans for borrowers who have annual incomes of $100,000 or less, to deduct the full cost of their mortgage insurance premiums on their federal tax return (consult tax advisor for limitations).
Alternative Options
Purchase Money Second - A second mortgage that closes simultaneously with the first.
Often the first mortgage is for 80% of the purchase and the second is for 10% - 20%
depending on what the lender will allow. Expect to pay a higher interest rate on the
second mortgage.
Seller Carry Back - When the seller carries a second mortgage, the seller will lend a part
of the sales price and holds a separate (second) mortgage. Typically the first mortgage
would be for 80% of the sales price, the seller would carry 15% and you would have a 5%
down payment. Expect to pay a higher interest rate on the loan financed by the seller.
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Residential & Commerical Mortgages
