Why Your Neighbor Owing You $500 is Not an Acceptable Form of Down Payment
I’m probably not allowed to say Christmas is coming. I bet it’s illegal by now. Lucky for me only four of you read this blog, because – Christmas is coming! I wrapped up my list to my mom quite promptly this year: “Anthopologie gift card. In the highest amount you can afford.” Oh kidding. I just humbly requested a gift card and only suggested she not give my brother any presents this year so that she could double the amount spent on me.
Speaking of gift giving, my ole Boss Chad wanted me to write you fine folks about a pesky matter that comes across his desk quite often. Seems his clients have all sorts of ways of coming up with a down payment for their home…
Here’s the thing. When it comes time for you to buy a home, you will have to provide bank statements to my ole Bosses, typically two months’ worth. Those statements will be pored over with a fine toothed comb. Now, the Bosses don’t care where you are spending your money (unless they see mortgage payments on a property you didn’t disclose to them, but that’s another story), so don’t get worried that someone will discover just how much money you actually do spend at Origins. No, the ole Bosses are more concerned with where you receive your money.
If they see consistent payroll deposits into your account from your employer, that’s great. That makes sense. But what gets kooky is if you have an account with $20,000 in it, and they see a $5,000 cash deposit here and a $700 wire transfer there, or something like that. That’s when the ole Bosses start asking questions. It’s not that you’re not allowed to have those transfers into your account. You just need to be able to document what they are if you plan to obtain a home loan.
In order to put a down payment on a home, my ole Bosses need to know that you actually have the money, and that it’s your money, not a loan from your hair dresser or credit card. Because here’s what a crook could do: Mr. Crook could call his crook friend and say, “Hey Buddy, loan me ten grand ‘til next month? I’ll give it back as soon as the mortgage guys are done looking at my bank statements.” And that, my friends, is what my dad used to call “tellin’ a story.”
See, when Chad asks his clients where their down payment will come from, some of them have the funniest answers, involving things like, “Well, I’ve got two thousand saved up, and my neighbor owes me eight hundred which he should pay me by Friday, and when I sell my X-Box I’m getting another one fifty. Then I’ll hustle together the rest by closing.” But we just can’t work like that.
Everything has to be documented. Even if you are getting your down payment as a gift from a parent or other relative (which is very common), called a “Gift Fund,” it has to be documented with the deposit slip, both yours and the giver’s bank statements, a copy of the check, and a letter of explanation to go along with it.
To wrap up all this jargon, just know that in order to purchase that sweet bungalow you’ve been eyeing, you will have to provide documentation that matches what’s in that bank account. Most of the time your pay stubs will suffice, but be ready to provide more documents if you’ve had random large sums of cash moving into your accounts.
If you have a large sum of cash you need to get rid of, email me immediately. If you have a moderately sized sum of cash ready to be put towards your new home, email the ole Bosses. Either way, please comment below with your questions about down payments so that my ole Bosses will believe I’m doing something remotely beneficial for their business here. (Or just tell me what you want from Anthro’s winter catalog and I can make up some mortgage questions to pass along for you using the ole “tellin’ a story” method.)