When you are in the early stages of the home purchase process, you may be wondering what you can use for a down payment. The obvious sources are assets in checking and/or savings accounts, or funds from a retirement plan.
The less obvious sources include gifts from close relatives (those related by blood or marriage) or down payment assistance programs. If you receive a gift, both you and the donor will be required to sign a document stating that there is no expectation of repayment.
Allowable down payment assistance programs include plans from city, county, and state sources. Bear in mind, however, that these programs are reserved for needy individuals in the areas that they serve.
Charitable organizations may also provide you with assistance with your down payment, but this must be approved by your lender.
The one from whom you must never expect to receive help in finding down payment cash is your seller. It’s perfectly acceptable to use seller credits for things like closing costs and other expenses, but they are never used for down payments.
The reason for this is that lenders want to know that you have a vested financial interest in the property. This lack of a vested financial interest was a contributing factor in the real estate meltdown, and lenders, as well as the federal government, want to make sure this never happens again.
If you have questions about a source of down payment, be sure to talk with your mortgage professional.
People do (and should) access their own credit reports. You should also be aware of the Fair Credit Reporting Act (FCRA). FCRA is federal legislation that was passed to assist members of the public who find incorrect information in their credit reports.
Bureaus will investigate
In the event you do find that your credit report contains information you believe is incorrect, the legislation allows you to open an inquiry with any or all of the three credit bureaus: TransUnion, Experian, and Equifax. These credit bureaus are responsible for providing the most accurate credit information possible, and when you submit a written request under FCRA, they are required to investigate.
If they find that you are correct and the information is inaccurate, they’re legally obliged to stop reporting it. As you can see, it’s worth your effort to pull your credit report regularly so that you are aware of what the bureaus are reporting, and can take action if necessary.
If you want to pull your own credit report, either talk to a mortgage professional or contact each bureau directly; the bureaus are required to provide you with a copy of your credit report upon request.
Credit reporting agencies
If you are unsure how to address incorrect items, a good place to start is with your mortgage professional. Mortgage professionals aren’t credit repair specialists, but they work with credit reporting agencies (CRAs).
CRAs have direct connections to TransUnion, Experian, and Equifax, and you can pay a CRA to address your items of concern with one or more of the bureaus. If the bureau(s) agree, they’ll remove the incorrect information from your report.
Be aware that negative items-such as late payments-that are legitimately included in your report will not be removed.
Contact your mortgage professional for more details.