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Acceptable Sources of Funds For Closing Costs / Down Payment

December 21, 2010

Every now and then, someone will ask me “is it okay if I ______________ to pay for my closing costs?” So I thought I would outline what most lenders will accept as an acceptable source of funds for closing costs and/or down payment when getting an FHA loan.

Remember: no matter what funds you plan on using, they are going to have to be documented as to the source of the funds.

Acceptable Sources of Funds For FHA Loans

  • Checking/Savings Accounts/CDs
  • Lease to Own/Rent Credit with Option to Purchase
  • Interested Party Contributions (subject to limitations)
  • Loan Repayment Proceeds (with appropriate and acceptable paper trail)
  • Corporate Relocation Buyout
  • Relocation Benefits
  • Use of Business Funds (as per policy and if allowed by underwriter)
  • Disaster Relief Grant or Loan
  • Non-Traditional Savings Plan/IDA Accounts
  • Employer Assistance
  • Gifts
  • Gifts-Pooled Funds
  • Gifts of Equity
  • Gifts/Grants from Non-Profit
  • Gifts – Wedding
  • Retirement Accounts
  • Proceeds from Sale of Home
  • Sale of Assets
  • Government Bonds
  • Stocks/Securities
  • Inheritance
  • Trade Equity
  • Land Equity
  • Trust Account
  • Life Insurance Net Cash Value
  • Bridge/Swing Loans
  • Income Tax Refunds
  • Saving Funds to Close
  • Gambling or Lottery Winnings (this is my favorite one)
  • Lawsuits or Insurance Settlements
  • Borrowed Funds Secured by an Asset
  • Financing Concessions
  • Cash-on-Hand

Whew. Sure, there might be more places that you could possibly come up with for a down payment / closing costs – but there are probably about 99% of all of the ones I have seen. Have questions about where your down payment can come from when getting an FHA loan? Be sure to ask your loan officer.

Filed Under: FHA Loans Tagged With: Acceptable sources of funds, FHA closing costs, FHA Down Payment, FHA Loans

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