Some bonus or miscellaneous income can be used to document acceptable source of funds.
The basic guideline is that these funds must be fully documented to verify their validity. Each lender makes the final decision about specific fund sources. Some examples of often
acceptable sources of funds include the following:
1. Regularly expected bonus
2. Commissions above normal average
3. Income from a special short-term contract
4. Wedding gifts
5. Tax refunds
6. Gaming and lottery income
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The net cash value of pension funds, such as individual retirement accounts (IRA) or 401-K accounts, are acceptable sources of funds. Instead of cashing these retirement accounts, however, applicants are often allowed to borrow against the current cash value of these accounts.
Proceeds from these accounts are treated just like funds from investment portfolios. They should be documented with copies of the most recent statements, the disbursement check and the deposit slip.
Even if no loans are made against these retirement accounts, the vested balance can still be used to satisfy reserve requirements.
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This variation of the “lease to own” option is acceptable as liquid assets with conditions. With most lenders, only that portion of a buyer’s rent that exceeds the property’s appraised market rent can be treated as cash accumulated for down payment. The original lease must contain an option to purchase provision specifying rent credited toward purchase.
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Most programs allow the seller or lender to pay the borrower’s closing costs and a small portion of the down payment. These subsidies are normally limited to 3% of the purchase price or refinance loan amount.
The primary documentation requirement for seller subsidies is an addendum or amendment to the purchase agreement. Lender subsidies normally do not need any additional documentation.
Note that if the seller subsidy is being used for the down payment, there are limits. Actually, there are minimum down payment requirements for the borrower, as described in the “Cash Gift” section of this article.
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