BOULDER – Before you get ready to buy a house, understand what type of funds you need to have available for your down payment – the lump sum paid upfront that reduces the amount of money borrowed.

Seasoned funds
The money you use for a down payment must be seasoned and in a verifiable, liquid account. To be seasoned, the money must have been acquired more than two months prior to the mortgage application. If it’s not seasoned, it has to be fully documented for the underwriter. Liquid accounts include checking, savings and money market accounts.

Gift funds
Money given from a relative toward a down payment must gifted, rather than borrowed. Documentation is required with a Gift Letter stating that repayment is not expected. Verification of the transfer of money is also required.

Secured loans
Loans taken against a secured asset (like a retirement account, car or other real estate asset) require documentation and verification of the deposit into a liquid account. The terms of the loan must also include these payments in the debt-to-income ratio.

Liquidation of assets
The sale of investment accounts like stocks, bonds and retirement accounts also requires documentation, as does the sale of personal property.

Cash isn’t an acceptable source of funds for a down payment because it can’t be documented. If you have cash on hand, deposit the funds and get them seasoned. The same rule of thumb applies to precious metals, collectibles, etc.

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Michael Roth is a Mortgage Loan Originator at Elevations Credit Union in Boulder. If you have questions regarding mortgages, please call 303.443.4672, ext. 2253 or e-mail [email protected].