Lenders verify you have enough assets for: down payment, closing costs (typically 2-5%), and reserves (2-6 months of mortgage payments). Assets include checking/savings accounts, retirement accounts (401k, IRA), investment accounts, and gift funds.
You will need 2-3 months of bank statements showing the funds.
Down Payment Funds
Your down payment comes from your verified assets. The minimum down payment depends on your loan program:
- Conventional: 3-5% minimum
- FHA: 3.5% minimum
- VA: 0% down
- USDA: 0% down
Closing Costs
Closing costs typically run 2-5% of the purchase price. On a $300,000 home, that is $6,000-$15,000. These include lender fees, title insurance, appraisal, escrow, recording fees, and prepaid items like property taxes and homeowners insurance.
Reserves
Some lenders require cash reserves — extra money in the bank after closing. Reserves are typically 2-6 months of mortgage payments. Conventional loans may require 2 months of PITI reserves, especially for investment properties. FHA and VA generally do not require reserves, though some lenders may.
Acceptable Asset Sources
- Bank accounts — Checking, savings, money market
- Retirement accounts — 401(k), IRA, Roth IRA (withdrawable amounts)
- Investment accounts — Stocks, bonds, mutual funds
- Gift funds — From family members with a signed gift letter
- Sale of assets — Proceeds from selling a car, property, or other assets
Documentation Required
Lenders require 2-3 months of the most recent bank statements for all accounts. They will look for:
- Your name and account number on every page
- No large undocumented deposits
- Clear source of funds for any large deposits
- Sufficient funds to cover down payment, closing costs, and reserves
How Gift Funds Work
Gift funds from family are allowed on most loan programs. The donor must provide a signed gift letter stating the money is a gift, not a loan. You will also need to show the donor's bank statement showing the funds were withdrawn from their account. The donor cannot be someone who benefits from the transaction (like the seller or real estate agent).
Asset Seasoning
Lenders want to see that funds have been in your account for at least 60 days. This is called seasoning. If you received a large deposit recently, the lender will ask where it came from. Transferring money between accounts is fine, just document the transfer.
