Down payments and bank statements

11 Replies

Hi everyone. I have a question regarding down payment percentage and bank statement requirements. Initially I had a private lender who was going to give me 100% of financing for a purchase. Unfortunately he has said he cannot cover the entire purchase but still wants to give me some of the money. I would like to use his $ for the down payment and finance the rest with a conventional mortgage. Question: if I put 20% down how far back would the mortgage lender require for bank statements? Would the mortgage lender question the large deposit in my account? Thank you. 

@Benjamin Dutil Most conforming loans and portfolio loans are going to require 60 days of statements (so you need 60 days of seasoning in the account to get past this). Be aware, you have to source deposits and transfers as well. Another thing that bites people in the rear end with a situation like this is that transfers/deposits do not time up properly. Then when the underwriter asks to source something from one account, it forces you to supply a statement that may be older than 60 days. Obviously if that happens, they may see the large deposit.

Hopefully this makes sense but let me know if you have more questions on it. 

Thanks Jeff! I’m assuming that 60 days is the rule of thumb for any % of down payment, 5%-20%? Is there a magic number where it wouldn’t be required say 30%?

Don't forget you're going to need reserves for this purchase as well..... so take that into account.

Originally posted by @Matt K. :

Don't forget you're going to need reserves for this purchase as well..... so take that into account.

 Thank you Matt. I’m currently living in the property and have been discussing the purchase for a while! I’m ultimately trying to “house hack.” And I’m definitely going to need to make some minor updates. Hopefully nothing will sneak up on me! I will definitely put some $ aside for such instances. What reserves do you suggest?

Originally posted by @Benjamin Dutil :
Originally posted by @Matt K.:

Don't forget you're going to need reserves for this purchase as well..... so take that into account.

 Thank you Matt. I’m currently living in the property and have been discussing the purchase for a while! I’m ultimately trying to “house hack.” And I’m definitely going to need to make some minor updates. Hopefully nothing will sneak up on me! I will definitely put some $ aside for such instances. What reserves do you suggest?

If you're doing an investment property and it's non owner occupied there will be certain reserves required by lender... typically I think it's like 6mo PITI. So say you had 20k in the bank, you'd need to keep part of that for those reserves vs all 20k towards the down. There are some ways around this by using retirement/stocks but that's something left for a real discussion w/ a loan officer...

Since you're house hacking this, it's owner occupied and it's different. I'm not familiar w/ the requirements for owner occupied since I don't do that.. but generally speaking it's less than investments. I know there are ways to get out of PMI by increasing the value, but again it'd depend on your loan. But there is a good chance you wouldn't need cash for a down payment for a house you're already living in if your doing a refi.

Since your living  in  the house and need to make repairs, have you considered a renovation loan?

@Benjamin Dutil From my experience, even if you were putting down 70%, there would still be a 60 day bank statement requirement. 

The answer to both of these questions is likely yes and yes.

I could be wrong but I think this is borderline mortgage fraud. For a conventional lender you’re not allowed to borrow the Down payment.

If you have a large deposit and you can’t explain it then they’ll likely disallow it as useable towards closing.

Typically they go back 2 months for bank statements but this can vary and I’ve had them go back an entire year before too

Thank you for your insight Caleb. I definitely don’t want to be involved in anything shady! Would the seller be able to carry my down payment in this situation?

Originally posted by @Elaine Capobianco :

Since your living  in  the house and need to make repairs, have you considered a renovation loan?

 Hi Elaine. The condition is good. No major repairs needed at this time. I’m assuming you’re talking about a 203k loan? If so the only problem is that the lender requires a contractor to do the work I believe. In my case I would be doing all the updates and repairs. 

You'll need 60 days of bank statements, usually anything before that isn't questioned. Also as mentioned earlier most banks will require you have sufficient funds to cover 6 months of mortgage payments and the amount of reserves required can be offset by any of your retirement account balances. Lastly don't underestimate the amount you'll need for closing costs ask your lender about any credits and try and work a seller credit into the deal.

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