It's pretty simple to explain the down payment, this is how much money you want to put down towards the purchase of your property. Purchase price - down payment = loan amount)
BUT, there are a lot of different things to remember when it comes to a down payment.
Depending on which program you decided on your lender will tell you how much you need to put down. This generally has to be your OWN money! How do you prove that it is your own money? Well this is what lenders ask for and look for. Whenever you are buying a new home the lender will want a minimum of 2 month bank statements from you showing how much money you have in your checking, savings, and Cd's. Also, if you do not have enough showing in these accounts they may also want copies of your 401K's and retirement plans. The key to proving that you have money to close is that the balance in your checking, savings, or Cd's has to have been there for at least 2 months. When banks review your statements they will also review the transactions, primarily the deposits. If you have any large deposits they will want to see where they came from, either by copies of checks, deposit slips, or invoices. They cannot verify cash deposits unless you can prove they came from another account with your name on it! If they can't prove it, you can't use it as your qualifying down payment. If yo don't have enough showing for your qualifying down payment you won't get the condition cleared for down payment which means....no deal, you can't buy the home. So what do you do if you don't have the money but someone wants to give it to you?
Well, you are in luck! Through FHA lending you are allowed to have your down payment "gifted" to you. This means that you do not have to pay it back and you can use it for your down payment! BUT, the gift can only be from a family member or close relative, see FHA guidelines if you have questions or contact a local lender (you can also leave a comment for me and I will get back to you!)
Congratulations you have completed the shortest section....part 5! :-)
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