Do you keep cash in a safe or other hidden place inside your home? If so, this is a big heads-up! You need to get that money into a bank account immediately and then wait for three months before you can use that money for a down payment.
“Everyone takes cash” — right? NO.
A mortgage lender needs to see two months’ bank statements showing the money in your account belonging to you. If there is a large deposit into your account, that deposit needs to be traced with paperwork. That is why you will need that third month for the money to season in your account: so the deposit doesn’t show on your bank statements.
Down payment money must be sourced. If you cannot document it with paper, you cannot use it. A signed letter does not count. Why? Because anybody can say anything in a letter–writing it down doesn’t necessarily make it true. A photograph of money hiding under your mattress doesn’t count, either. Why? Because you could have taken a cash advance on your credit card and then stashed the money under your bed. Or in your home safe. That would be borrowed money from a credit card company, which is not allowed.
You must officially document your down payment money.
If you sold a vehicle, you can use that money for your down payment as long as you provide the Bill of Sale, the receipt showing the cash being deposited into your account, and a bank statement showing the cash in there. But beware! The dollar amount of the Bill of Sale and the deposit slip must match exactly, so you cannot keep out some money for shopping.
If you want to use your tax return for the down payment, you must provide a copy of your tax returns showing the refund owed and then the deposit receipt for the exact same amount and a bank statement showing the money in.
If you want to use gift money from your mother, you must provide your mother’s bank statement showing she owned the gift money as well as have her sign a form gift letter from your mortgage lender. Why? Because your mother cannot take out a cash advance on her card for your down payment. She must show “ability to give” with a bank statement.
You get the idea. The documentation needs to come from a legal source and cannot be something someone wrote up and had a friend notarize the signature on; nor can it be a sneaky side loan.
With more Americans nowadays saving money in a personal safe (or, horrors!, even a plastic garbage bag) this is important information to know. Get your “house money” into the bank and keep it there (preferably in one account) until it is time to get that cashier’s check at closing.
If you know someone who this applies to, please pass on the information, because it is no fun to be blindsided with a rule you never knew about.