FHA Loans: Acceptable Sources For Down Payments

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When getting an FHA loan, it is common for one of the biggest questions to be about the (currently) required 3.5% down payment.  Many people have questions about what is or what isn’t allowed when it comes to rounding up the 3.5% down payment that is required.

Regardless of where you are going to get your down payment from, one of the more important things to keep in mind is that your down payment funds are going to have be documented.  Documented meaning you are going to need to provide a paper trail as to where the money came from.

Planning on shaking the cushions out on your couch for your down payment? Don’t.  You won’t be able to provide the required paper trail for the money and it will cause you problems in underwriting.  While not all-inclusive, here is a simple list of some of the most common sources of down payment funds for FHA loans:

Down Payment Funds For FHA Loans: Acceptable Sources

  • Checking account
  • Savings account
  • CDs from your bank
  • Lease to Own/Rent Credit with Option to Purchase
  • 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 (this is my favorite one)
  • Lawsuits or Insurance Settlements
  • Borrowed Funds Secured by an Asset
  • Financing Concessions
  • Cash-on-Hand

When it comes to providing documentation for the source of where you got your down payment money, each lender may have slightly different requirements – and it is possible that one lender will accept something that another lender won’t.  But if you be careful and document the source of your down payment carefully, then you should be okay when it comes to getting your file through underwriting.

And as with most of the nuances with FHA loans, having a great loan officer helping you along and there to answer any questions you have can make all the difference.

Justin McHood

Justin McHood is a Mortgage Commentator living in the Phoenix, Arizona area and is happy to answer any mortgage-related questions that you may have.
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Justin McHood is a Mortgage Commentator living in the Phoenix, Arizona area and is happy to answer any mortgage-related questions that you may have.

3 Comments

  1. Can’t deposited money you’ve been able to keep in your account for 60 days or more, or “seasoning of funds” (which shows you have the ability to save), be acceptable which could have very well have come from your couch cushions?

  2. Pingback: Or Down Payment Loan | paydayloanskit.com

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