There is a requirement on Conventional loans to have a certain amount of your down payment come from your own hard earned savings. Not only do you need a certain minimum down payment for different types of Conventional loans. You also need to make sure a certain amount comes from your own money, and not a gift. And not borrowed funds, unless they are secured against an asset like real estate or a stock account.
Conforming loans
On a Conforming loan, which are loans that go up to $417,000, the minimum down payment is 5% down. All of that 5% down payment has to come from your own funds. Any other funds needed, which after the 5% minimum down payment requirements are only the closing costs, can come from a gift. You may also borrow the closing costs. But you have to be borrowing against an asset you own, like real estate, a CD account, or a stock account. Those assets are your own, and borrowing against them is considered using your own funds. Borrowing money from an unsecured source, like a personal line of credit or a credit card, is never allowed.
Conforming “High Balance” loans
On a Conforming “High Balance” loan, which are loans that go from $417,001 to $625,500, the minimum down payment is 10% down. All of that 10% down payment has to come from your own funds. Any other down payment you choose to make above the 10% down minimum can be from one of the aforementioned acceptable sources. But you have to have 10% of the sales price of your own cash into the deal.
Jumbo loans
Jumbo loans are loans over $625,500. The rules vary from lender to lender as to the minimum amount of down payment needed. It is usually 20% down. In general I would say if you have 5% of your own assets into the down payment, the rest can be from a gift or other acceptable source. Also, you typically need a much larger amount of “cash reserves” on a Jumbo loan. For example, 6 months of the monthly payment. The rules vary here as well.
Make sure you ask your lender what the rules are if you are getting a gift, or are using any other source other than your own money. This will ensure there will be no last minute snags.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
