When putting in a down payment, lenders would like to know where the money came from and if it does indeed belong to you. This is typically verified by providing the lender with bank statements. There will be a balance as well as showing withdrawals and deposits. Lenders want to see a balance and also want to make sure you have enough funds for not just the down payment but also for closing costs and some extra left over lenders refer to as 'cash reserves.'
Allowable funds for a down payment include money from your checking, savings or retirement accounts but can also come in the form of a financial gift from a qualified source such as a family member or non-profit. But what if you're still a little short, can you sell things to raise down payment money?
In short, yes, but there is a caveat. Minor deposits into your checking accounts won't typically need to be sourced but larger deposits will be. The items sold must be an appraisable asset. This means a used car or anything that a lender can verify that has a value issued by a third party. That's why a used car can be used as an appraisable asset and to raise funds for a down payment. It's relatively easy for a lender to obtain the value of a vehicle.
The sale must be carefully documented as well. There needs to be a paper trail of the transfer. The value must be verified via third party and show that the funds were deposited into an account you own.
If you're not sure if your asset that you're thinking of selling has a third party verifiable value, you should speak with your loan officer for details. Lenders have general guidelines they follow but they can also issue their own qualifying guidelines. For example, some lenders may want to see the asset be relatively new. A car might need to be three years old or less, for example. Your lender will provide you with their guidelines as well as how to properly dispose of the asset and transfer the funds into your account. This is all done to make sure the funds belong to you and the asset you're selling is yours.
Coming up with funds for a down payment and closing costs is perhaps the biggest hurdles first time buyers have. But you can indeed sell certain assets you own to help.
