Secondary financing through a family member:

Did 'ya know that an immediate family member can loan the Down Payment and other costs of closing to the buyer-borrower? The combined amount of financing (the 1st and the 2nd) cannot exceed 100% of the lesser of the Appraised Value or Sales Price, plus normal cc's, pp's, and discount points. No cash-back to the borrower of any amount is permitted on the HUD-1. An executed copy of the document outlining the terms of the secondary financing must be part of the lender file; however, it does not have to be recorded. It's also OK if it IS recorded (i.e., secured against the property); when it IS secured/recorded, only the family-member provider(s) may be the note holder. (FHA absolutely will not allow a non-family member as a note holder, neither at loan closing nor arranged to occur anytime during the mortgage's life cycle. And the definition of family member is more "narrow" than the usual definition -- here, it includes only a parent, child or grandparent of the mortgagor or the mortgagor's spouse.) If periodic payments are to be made on the secondary financing, then the monthly amount must be included in the borrower's DTI calc. The funds lent by the family member can be borrowed from an acceptable source; however, our buyer-borrower cannot be a co-obligor on any note used to secure the money (that is subsequently lent for the DP).

Sale of personal property:

We must see evidence that the item(s) has been sold, AND we must be provided with a satisfactory estimate of the items' worth. We will use the lesser of the estimate of value or the actual sales price as the allowed asset amount to close. Examples of personal property items include: Cars, recreation vehicles, collections (coin, stamp, baseball, etc). Please don't even try to use furniture, clothing, etc.

Cash saved at home (aka cash-on-hand; mattress money):

Borrower's who can demonstrate to us an ability to save money outside of a financial institution can use that money for their DP and costs to close. However, CAUTION -- if they DO have checking and/or savings accounts, we are less likely to allow money from under the mattress. We must determine the reasonableness that this money was judiciously saved based on the borrower's income, the period of time the funds were saved, overall spending habits, and use of financial institutions in general. We must also verify the actual money by seeing it either properly deposited into a financial account or given to the title company in anticipation of closing.

Certain borrowed funds:

Did 'ya know that there are SOME circumstances when the borrower can borrow funds for his/her DP (and cc's, pp's and discount points)? Like when the funds are fully secured by existing marketable assets .... such as stocks, bonds, autos, real estate (other than the subject property). And when secured signature loans, cash-value of life insurance policies, or loans from 401(K)s are used for the DP, we do not need to count their monthly repayment in the borrower's DTI calc. CAUTION, though -- when using such funds TO close, they cannot also be used in any comp factor count or reserves (when required). Proof of borrower funds of this nature must be provided by an independent third party ... NEVER can the seller, the RE agent/broker, or the lender provide this proof. (Note: The borrower cannot pay for his DP and costs to close with a credit card -- at most, he/she can pay for the credit report and appraisal with a credit card, but that's it.)