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Message
Home buying question re: source of cash to close
Posted on 1/4/24 at 9:45 pm
Posted on 1/4/24 at 9:45 pm
What is the MT's preferred method of funding the downpayment/closing costs of a new primary home prior to the closing on your current home.
Say you have the dollar amount needed for the downpayment, prepaids and closing costs etc, but it is spread between retirement accounts, emergency fund cash, checking account, crypto, taxable brokerage accounts etc.
The sale and proceeds of your current home are not at risk in this hypo, you just won't have access to that money until 30 days after the closing on the new home.
Say you have the dollar amount needed for the downpayment, prepaids and closing costs etc, but it is spread between retirement accounts, emergency fund cash, checking account, crypto, taxable brokerage accounts etc.
The sale and proceeds of your current home are not at risk in this hypo, you just won't have access to that money until 30 days after the closing on the new home.
11
Posted on 1/4/24 at 10:22 pm to JohnnyKilroy
Bridge loan or use Heloc from first house.
Posted on 1/4/24 at 10:24 pm to JohnnyKilroy
If it isnt your first home, you shouldn't be using retirement funds.
Based on your limited information, banking assets should be easiest to draw (checking/emergency funds).
Taxable brokerage is second.
Someone else can chime in on how/where to put crypto on there.
Based on your limited information, banking assets should be easiest to draw (checking/emergency funds).
Taxable brokerage is second.
Someone else can chime in on how/where to put crypto on there.
Posted on 1/4/24 at 10:27 pm to JohnnyKilroy
Don’t touch retirement. You hopefully have enough cash or easily liquid to do the down payment. If you don’t, either hold off and save or talk to family. My dad loaned me money to help me with my first house and I loaned my best friend money to close a house. If you do this, pay them back quickly. If you can’t do that, don’t borrow the money.
Posted on 1/4/24 at 10:32 pm to JohnnyKilroy
quote:
Say you have the dollar amount needed for the downpayment, prepaids and closing costs etc, but it is spread between retirement accounts, emergency fund cash, checking account, crypto, taxable brokerage accounts etc.
It doesn't sound like you have the dollar amount needed
Posted on 1/4/24 at 10:38 pm to JohnnyKilroy
quote:
emergency fund cash, checking account,
These two.
If this is true.
quote:
The sale and proceeds of your current home are not at risk in this hypo, you just won't have access to that money until 30 days after the closing on the new home.
Posted on 1/5/24 at 3:27 am to mtcheral
quote:
Bridge loan or use Heloc from first house.
But wouldn’t these possibly effect your credit score and dti and thus effect the terms of your new mortgage?
I know lenders are also generally not fans of home loan borrowers opening new lines of credit immediately before closing on a new mortgage.
Posted on 1/5/24 at 3:34 am to JohnnyKilroy
This is the question you figure out as a priority before putting an offer in OP.
Where else do you think people have money? It’s generally in one of the accounts you listed.
Yes you need to get into your taxable brokerage, emergency fund. Etc to get a down payment down and then refund those once your current home sells.
The other option is to do a cash out refinance, but that’s expensive.
Where else do you think people have money? It’s generally in one of the accounts you listed.
Yes you need to get into your taxable brokerage, emergency fund. Etc to get a down payment down and then refund those once your current home sells.
The other option is to do a cash out refinance, but that’s expensive.
Posted on 1/5/24 at 5:25 am to JohnnyKilroy
quote:
Say you have the dollar amount needed for the downpayment, prepaids and closing costs etc, but it is spread between retirement accounts, emergency fund cash, checking account, crypto, taxable brokerage accounts etc.
It sounds like you do not have available funds to responsibly buy a house at this time.
Posted on 1/5/24 at 5:46 am to JohnnyKilroy
I paid cash for my last home. It doesn’t sound like you can afford your purchase.
Posted on 1/5/24 at 6:49 am to BabyTac
Hard to say without knowing numbers in each of your accounts referenced.
I would likely put the minimum you need down, then once you sell your house, you can put a big lump sum down. You can recast your loan where they alter your payments based on the new lump sum you put down.
I would likely put the minimum you need down, then once you sell your house, you can put a big lump sum down. You can recast your loan where they alter your payments based on the new lump sum you put down.
Posted on 1/5/24 at 7:03 am to LSU1018
quote:
You can recast your loan where they alter your payments based on the new lump sum you put down
I haven't heard of that.
Posted on 1/5/24 at 7:16 am to JohnnyKilroy
You’ll need to “source” the funds for your lender - ie prove where the money came from.
Your dp/cash to close will need to be liquid. They ask for last two months statements. Any large deposit that isn’t your paycheck will need documentation of where it came from. Crypto is frowned upon, HELOCs or equity loans will need to be doc’d and the payment counted in your debt ratio. Unsecured loans won’t be allowed.
Be upfront with your lender as to where you are getting the money. I’ve seen plenty of deals go south because the borrower lied about the source or got it from an ineligible source.
Your dp/cash to close will need to be liquid. They ask for last two months statements. Any large deposit that isn’t your paycheck will need documentation of where it came from. Crypto is frowned upon, HELOCs or equity loans will need to be doc’d and the payment counted in your debt ratio. Unsecured loans won’t be allowed.
Be upfront with your lender as to where you are getting the money. I’ve seen plenty of deals go south because the borrower lied about the source or got it from an ineligible source.
Posted on 1/5/24 at 7:51 am to JohnnyKilroy
It sounds to me like you can afford this purchase but simply need a strategy to get the cash upfront vs waiting for your home sale. I’ve done this a few times with no problems. If you do use Heloc or bridge loan then you must be prepared to cover 2 notes for a few months until your old house sells. If you e already got a buyer that won’t be as big of a concern but still need to be prepared in case that deal goes south. Best thing you can do is talk with your lender and they should be able to tell you the options that woiluld be best for you. Each time I’ve done it, my lender or mortgage officer helped determine which option would work best.
Posted on 1/5/24 at 8:04 am to JohnnyKilroy
quote:
But wouldn’t these possibly effect your credit score and dti and thus effect the terms of your new mortgage?
I used my HELOC. It was already open and I drew down on it soon after my offer was accepted. I was upfront with my lender about the funds.
It does affect DTI but had no effect on terms of mortgage I was able to get.
I’d use checking, emergency fund, and HELOC to fund the down payment if DTI is not an issue. If it is an issue, then liquidate brokerage and take a smaller HELOC.
Posted on 1/5/24 at 8:07 am to JohnnyKilroy
I borrowed against taxable brokerage using a pledged asset line to fund recent mortgage down payment and closing costs. The lender had no issues with it. I was up front with them. They even came back and said after running few different scenarios if I borrowed more from brokerage to put a little bit more down it would reduce mortgage rate.
Posted on 1/5/24 at 8:21 am to mtcheral
quote:
It sounds to me like you can afford this purchase but simply need a strategy to get the cash upfront vs waiting for your home sale. I’ve done this a few times with no problems. If you do use Heloc or bridge loan then you must be prepared to cover 2 notes for a few months until your old house sells. If you e already got a buyer that won’t be as big of a concern but still need to be prepared in case that deal goes south. Best thing you can do is talk with your lender and they should be able to tell you the options that woiluld be best for you. Each time I’ve done it, my lender or mortgage officer helped determine which option would work best.
Posted on 1/5/24 at 9:48 am to meansonny
quote:
I haven't heard of that.
Some loans allow a one time recast.
Problem there is if you put down a small DP you have to go through the process of removing pmi and you will also likely not get the best rate possible.
This thread has been helpful and I will be on the phone with lenders today to discuss the best options. Having the funds isn’t an issue. It’s more about what is the most efficient method that incurs the least amount of costs/taxes etc.
Obviously in a perfect world I receive the proceeds from my current home, but due to reasons beyond my control, there is only a slim chance that occurs. It will occur, just not prior to the closing date of the new home.
Posted on 1/5/24 at 10:43 am to JohnnyKilroy
I would say most loans offer the one time recast option. Depending on the loan you choose, PMI could also be removed when you put the lump sum down bc you would have reached the percent needed.
Posted on 1/5/24 at 12:08 pm to meansonny
quote:Same tax implications as a taxable brokerage account.
Someone else can chime in on how/where to put crypto on there
I’d probably pull from the checking and emergency funds if the other house will be sold in a month or so to replenish those funds
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