I have heard that most lenders will require a borrower to have seasond funds. I am looking for some information about seasond funds.
How much money does a lender need a rule?
How liquid does this money have to be?
Any other requirements for seasond funds that I may not be asking about?
Thanks for your help on this.
Joe
Depending on the type of loan your looking for, a bank will ask for up to 3 months past bank statements showing your funds. If you have the money for more than 3 months in the bank do not worry. This is because if your parents are giving you the downpayment like 1 month before closing the banks will know its a gift and the IRS will tax it right. But if you are getting whats called a NINA loan, No Income No Asset loan then they will not care where the money is coming from… usually just 1 months bank statement to see some cash of course… Banks generally consider bank accounts, IRA’s, 401K, mutual funds, money in online trading accounts(the reserves) to be considered ok for proof of funds. Banks many times want to see you have 2-6months PITI in the bank just incase but does not neccessary have to be totally liquid…
In addition to you down pament and closing cost being verified, lenders are looking for 6 months of reserves. This would be 6 months of the new principal, interest, tax, and insurance payments.
These funds should be in some form of asset such as checking, savings, money market, 401K, mutual funds, etc…(anything that is retirment and could be taxed upon withdraw is calculated at 70%). These funds have to have been in the account for at least 60 days.
A home equity line of credit off a primary home or investment property is usually acceptable for down payment and closing cost. However, lenders have programs that vary about using helocs for reserve requirements.