As your down payment, you'll likely need to pay a lot of money when you buy a house. You will need to pay 3 percent or more of the house's value in cash.

Your lender must analyze and document your source of down payment in order to approve your loan. Conventional loans require that the borrower has at least 5 percent of their own money as a downpayment. Lenders will want to verify that they can find large deposits in your account to ensure no unauthorized borrowings. Before they approve you for a loan, they want to verify that your income-to-debt ratio (or DTI) is correct. Credit cards, personal loans, and other unsecured borrowings are not allowed. They are not permitted as a down payment.

Savings And Checking Accounts

Your bank will usually request the statements from your savings and checking accounts for the past 2-3 months. Your lender will confirm the source and location of your down payment. In addition, your lender might ask you to describe large or unusual deposits on your statements and provide documentation. If you transfer money from one account into another, make sure you have a paper trail that can be used to document the transactions.

Stocks, Bonds, Mutual Funds, 401K, And Other Retirement Accounts

Your lender may want to see your assets. This includes any stocks, bonds, or retirement accounts. You must document the sale and transfer of assets if you intend to liquidate them as part of your downpayment.

Gift Funds

To help buy a home, some people use a monetary gift from their family or parents. Your lender will ask the donor to sign a "gift note" if any part of your down deposit was made from a gift. This letter will outline your relationship with them, their contact information, and the address of the property you will purchase. It will also state the amount of the gift and the source.

The donor must declare that the gift funds are a donation and not a loan. If the lender has any interest in the sale of the property, they will want to make sure that the donor is not involved in it (e.g., if they are related to the seller, agent, builder, etc.). Likewise, the lender is interested in ensuring that the donor has no interest in the sale of the property (they are related to either the seller, an agent, or a builder).

Also, you will need to document the withdrawal or transfer of gift money. These documents could include a canceled check or bank statement, confirmation of wire transfer, or a confirmation of wire transfer.