Yes, you can borrow funds to use as your down payment! However, any loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it’s a perfectly acceptable source of funds. If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.
Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We’ll ask you for the name, address, and phone number of the gift giver, as well as the donor’s relationship to you. We will also request a gift letter. If your loan request is for more than 80% of the purchase price, we’ll need to verify that you have at least 5% of the property’s value in your own assets. Prior to closing, we’ll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.
Unfortunately, if you are purchasing a home, we’ll have to use the lower of the appraised value or the sales price to determine your down payment requirement. It’s still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors don’t allow us to use this “instant equity” when making our loan decision.
Typically, income from a second job will be considered if a one-year history of secondary employment can be verified.
Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.
Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes. Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.
If you own rental properties, we’ll generally ask for the most recent year’s federal tax return to verify your rental income. We’ll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won’t be counted against your rental income. If you haven’t owned the rental property for a complete tax year, we’ll ask for a copy of any leases you’ve executed and we’ll estimate the expenses of ownership.
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn’t required to be reported. Some lenders may offer a stated income program, which means that you can be qualified for a loan based on the income you state rather than that which can be verified. Usually these programs require larger down payments and offer interest rates that are substantially higher than regular mortgage rates. We do not offer stated income programs at this time.
We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don’t have an award letter, we can contact the source of this income directly for verification. If you’re receiving tax-free income, such as social security earnings in some cases, we’ll consider the fact that taxes will not be deducted from this income when reviewing your request.
In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We’ll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We’ll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income. If you haven’t been receiving bonus, overtime, or commission income for at least one year, it probably can’t be given full value when your loan is reviewed for approval.