Though many Doctor Loan programs allow for a small down payment, the guidelines concerning where the funds are derived from, can be complicated.
If the lender requires 5% of the purchase price be from your own funds, one must be well prepared.
Checking, savings, investment accounts, etc. are typically the source of funds. Great, your balances well exceed this threshold.
Not so fast…. If you have non-payroll deposits in the bank accounts, they must be sourced and documented. Lenders require 60 days of recent statements to evidence the down payment.
Here’s where the heartburn begins. Say your folks gave you $28,000 to deposit in your account in preparation of your upcoming purchase. If the deposit shows up on the most recent 2 months of bank statements, this must be considered a gift and will not be counted toward the 5% required down payment from your own funds.
The gift funds may be counted toward your closing costs and reserve requirements, but not the 5% down. If you have ample funds for 5% down, and would like to put a large down payment into the transaction, gift funds may be applied to the additional down payment as long as you meet the 5% down from your own funds.
Cash on hand deposited into your bank accounts will not be counted either. If you sell personal property, and want to count the funds, be prepared to show evidence of ownership, the bill of sale, and a paper trail of the funds hitting your account.
How do you avoid this paperwork nightmare? Plan ahead! Most lenders consider your personal funds “seasoned” if large deposits do not show up in the most recent 2 months of statements.
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