Sometimes, though not frequently enough, money just seems to fall into our laps. A few ways we might unexpectedly wind up with a large sum of money are through inheritances, gifts, tax returns, and bonus checks.
Your chances of becoming a homeowner will be greatly increased if you have been saving for a down payment. But, “sudden” money comes with a catch.
What are Sourced Funds?
Sourced funds are funds that can be traced back to their original source. This means that you need to be able to provide documentation showing where the money came from. For example, if you are using a gift from a family member for your down payment, you will need to provide a gift letter from the donor, as well as bank statements showing the transfer of funds.
What are Seasoned Funds?
Seasoned funds are funds that have been in your bank account for a certain period of time. The most common seasoning period is 60 days, but some lenders may require a longer period. This is to ensure that the funds are truly yours and that you are not using borrowed money for your down payment.
Why Do Lenders Require Sourced and Seasoned Funds?
Lenders require sourced and seasoned funds to protect themselves from fraud and to ensure that borrowers have the ability to repay their loans. By requiring borrowers to provide documentation showing the source of their funds, lenders can reduce the risk of borrowers using borrowed money or money from illegal activities for their down payments.
How to Source and Season Your Down Payment Funds
The best way to source and season your down payment funds is to start saving early. If you know that you will be buying a home in the future, start setting aside money each month in a dedicated savings account. This will give you time to accumulate the funds you need and to season them so that they meet the lender’s requirements.
Here are some tips for sourcing and seasoning your down payment funds:
- Start saving early. The more time you have to save, the easier it will be to accumulate the funds you need.
- Set up a dedicated savings account. This will help you keep track of your progress and make it less likely that you will spend the money on other things.
- Make regular deposits. Even if you can only afford to save a small amount each month, it will add up over time.
- Avoid using borrowed money. This includes credit cards, personal loans, and home equity lines of credit.
- Don’t use funds from illegal activities. This could jeopardize your ability to get a mortgage.
What if I Don’t Have Sourced and Seasoned Funds?
If you don’t have sourced and seasoned funds, there are still a few options available to you. You may be able to get a loan with a higher down payment requirement, or you may be able to use a gift from a family member. However, it is important to note that these options may come with additional costs or restrictions.
Sourcing and seasoning your down payment funds is an important step in the homebuying process. By following the tips above, you can increase your chances of getting approved for a mortgage and buying the home of your dreams.
Frequently Asked Questions
What is the difference between sourced funds and seasoned funds?
Sourced funds are funds that can be traced back to their original source. Seasoned funds are funds that have been in your bank account for a certain period of time.
Why do lenders require sourced and seasoned funds?
Lenders require sourced and seasoned funds to protect themselves from fraud and to ensure that borrowers have the ability to repay their loans.
How can I source and season my down payment funds?
The best way to source and season your down payment funds is to start saving early and make regular deposits into a dedicated savings account.
What if I don’t have sourced and seasoned funds?
If you don’t have sourced and seasoned funds, you may still be able to get a mortgage with a higher down payment requirement or by using a gift from a family member. However, these options may come with additional costs or restrictions.
What is the best way to source and season my down payment funds?
The best way to source and season your down payment funds is to start saving early and make regular deposits into a dedicated savings account. This will give you time to accumulate the funds you need and to season them so that they meet the lender’s requirements.
I am a first-time homebuyer. What should I know about sourcing and seasoning my down payment funds?
As a first-time homebuyer, it is important to start saving early and to make regular deposits into a dedicated savings account. This will help you accumulate the funds you need for your down payment and to season them so that they meet the lender’s requirements. You should also talk to a mortgage lender to learn more about the specific requirements for sourcing and seasoning down payment funds.
I am planning to buy a home in the next few months. What should I do to prepare for sourcing and seasoning my down payment funds?
If you are planning to buy a home in the next few months, you should start saving early and make regular deposits into a dedicated savings account. This will help you accumulate the funds you need for your down payment and to season them so that they meet the lender’s requirements. You should also talk to a mortgage lender to learn more about the specific requirements for sourcing and seasoning down payment funds.
I am not sure if I have enough money saved for a down payment. What should I do?
If you are not sure if you have enough money saved for a down payment, you should talk to a mortgage lender. They can help you determine how much you need to save and can provide you with information about different loan options that may be available to you.
I am worried about the cost of closing on a home. What can I do to reduce the costs?
There are a few things you can do to reduce the cost of closing on a home. You can shop around for the best interest rates on your mortgage, and you can ask your lender about any closing cost credits that may be available to you. You can also try to negotiate with the seller to help pay for some of the closing costs.
I am feeling overwhelmed by the homebuying process. What should I do?
If you are feeling overwhelmed by the homebuying process, you should talk to a mortgage lender or a real estate agent. They can help you understand the process and can answer any questions you may have. They can also help you find the right home for your needs and budget.
I am excited about buying a home. What should I do next?
If you are excited about buying a home, you should start saving for your down payment and talk to a mortgage lender to get pre-approved for a loan. You should also start looking for homes that meet your needs and budget. Once you find a home you love, you can make an offer and start the closing process.
What are seasoned funds?
If funds have been in your account for a predetermined period of time, they are regarded as “seasoned.” A 60-day seasoning period is required by many lenders, and some require the money to be in the account for 90 days or longer. Then, there are some who require only a 30-day period.
Consult your lender about the minimum amount of time your funds need to be seasoned before beginning the loan process.
Lenders like things seasoned
When money appears out of nowhere and suddenly becomes available, lenders get suspicious. Your lender will require a record of every penny you currently possess and anticipate obtaining in the near future.
Additionally, the lender will inquire about the amount and location of your down payment funds.
They are particularly cautious of borrowers who obtained those funds through another loan. It increases the borrower’s risk and might prioritize the other lender in the event that you fall behind on your mortgage payments.
Even if the windfall for your down payment was earned legitimately (a large bonus at work, a tax refund, etc.) Instead, the lender will probably request “seasoned” funds.