Sometimes (not often enough, in our opinion) money falls into our laps. Tax returns, bonus checks, gifts and an inheritance are just a few ways that we can come into a chunk of money suddenly.
If you’ve been saving for a down payment on a home, the windfall will go a long way toward getting you closer to home ownership. But, “sudden” money comes with a catch.
Lenders like things seasoned
Lenders become skeptical when money suddenly appears, seemingly out of nowhere. Your lender will want a paper trail of every last cent you have and expect to have in the near future.
And, the lender will ask about your down payment funds – how much you have and where it’s being kept.
They are especially wary of borrowers who have taken out another loan to get those funds. It makes the borrower more of a risk and it may also put the other lender in first place should you default on your mortgage.
Even if your down payment windfall came from a legitimate source (a big bonus at work, a tax refund, etc.) the lender will most likely ask for “seasoned” funds instead.
What are seasoned funds?
Funds are considered “seasoned” if they have been in your account for a specified amount of time. Many lenders insist on a 60-day seasoning period, some want to see that money in an account for 90 or more days. Then, there are some who require only a 30-day period.
Find out from your lender how seasoned your funds must be and don’t start the loan process until that amount of time has elapsed.
You’ll need to “source” that money as well
Where did you get the money? Be prepared to not only answer the question, but prove the source of the funds as well.
Again, lenders want to ensure that you aren’t using a short-term loan or some other source that may put the loan at risk.
If the money wasn’t saved from your income (which is easy to prove), you’ll need to offer proof that, yes, Aunt Martha died and you inherited her savings.
Taking money from an investment account to use for your down payment or closing costs?
“If you withdraw cash from an investment or retirement account (like a 401k or an IRA) that has certain restrictions on withdrawals, the underwriter will likely ask to see the terms of the withdrawal in writing,” according to Brandon Cornett at QualifiedMortgage.org.
Gift funds get extra scrutiny
For money to be considered a gift, the giver must have no expectation of being repaid.
The lender will source the gift, determining who gave it to you. Most lenders require that all gift funds must come from family members.
Gift funds get a bit trickier if you’ll be using an FHA-backed loan. Borrowers with low credit scores (typically between 580 and 619) will need to ensure that at least 3.5 percent of the down payment is their own money – it can’t come in the form of a gift.
If you will be putting down 20 percent as a down payment, regardless of your score, often the entire down payment can be sourced from a gift (ask your lender about its policies).
You’ll need a letter from the person gifting you the money, addressed to the lender. It should include the giver’s name, address and phone number, their relationship to you, the amount of the gift and the date on which it was given.
The letter should clearly state that the money was given as a gift and there is no expectation of repayment.
You’ll be asked for documentation from the lender for almost every aspect of your financial life, including a certain number of bank statements. TIP: Include ALL pages of your statements, including those that are blank.
We aren’t accountants or mortgage brokers, so we urge you to consult with a professional should you have any questions about obtaining a mortgage.
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Introduction to Jennifer Y. Ross & The Westchester Living Team at COMPASS
Jennifer comes from Platinum Drive to Compass as an experienced agent. She epitomized Platinum Drive Realty’s motto “I grew up here. I live here. I sell homes here” and she is known for providing each of her clients with an exceptional experience guided by her expert local knowledge. She works tirelessly to ensure each of her clients has a professional, enjoyable and successful Westchester community & home buying search or selling experience. She often remains very friendly with her clients and welcomes the opportunity to be an ongoing resource as they settle into Westchester Living. Every step she takes will embody her core principals; integrity can never be compromised, clients’ interests always come first and character, commitment, and passion truly matter. For her buyer clients, Jennifer looks forward to the opportunity of being “Your NYC to Westchester” guide and real estate broker. For her seller clients, Jennifer is proficient at implementing an aggressive marketing strategy in order to obtain the best price possible in a highly efficient and seamless manner. Jennifer thoroughly enjoys assisting buyer clients in navigating the landscape of the Westchester residential real estate market. She is skilled at enabling clients to define where they see opportunity & facilitating the process from initial search through closing. Jennifer was awarded the Platinum Drive Star Award for Outstanding Performance in Sales & Client Services in 2014 & Platinum Drive Realty’s Superstar Award for Excellence in Sales and Client Services 2015 & 2016 for her outstanding performance in sales and client service. In addition to her passion for local real estate, Jennifer has a firsthand understanding of home renovation and new construction. Upon moving from NYC to Scarsdale, she and her husband performed an extensive renovation on their first home. After completion, they moved onto their second project in Larchmont, a full house renovation and expansion. More recently she is active with local developers who specialize in new home construction, home expansions and renovations. Jennifer has the ability to understand a home’s full potential and can help clients find or create their dream home. Jennifer was the Manager of Platinum Drive Realty’s Larchmont Office. Jennifer was raised in Scarsdale. After graduating from Scarsdale High School, Jennifer received a BA in Child Study & Sociology from Tufts University and an MA in Language & Literacy from New York University. Jennifer currently lives in Larchmont with her husband, Michael, and their three sons, Braden, Devon & Zane. She specializes in communities in Southern Westchester with a concentrated focus on the Sound Shore Communities of Larchmont, Mamaroneck, Rye Neck, Rye, New Rochelle as well as her hometown of Scarsdale. Prior to real estate, Jennifer was a teacher in the Mamaroneck Public Schools. Jennifer has a deep understanding of the local school systems and the needs of young families.
Professional Associations & Accreditation
Jennifer is a Licensed Associate Real Estate Broker & has her Accredited Buyer Representative designation (ABR) and her Seller Representative Specialist designation (SRS). Jennifer is a member of the Hudson Gateway Association of Realtors & the National Association of Realtors. Jennifer’s Website: westchesterliving.hou