Where You Can (And Can’t) Get Money for a Down Payment

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.