So, we just sent in an offer on a house stating how much we will pay in cash (down payment). I understand that this is transfered to the seller (along with the loan amount) at settlement. However, our next step is to apply for the loan, though we have been pre-approved. Currently, we don't have the exact amount of the down payment in our accounts, however, we will by settlement due to 4 more paychecks coming in.

Does it matter to the lender at the time of loan application, whether the full amount of the down payment is in our possession?

  • If you don't have the fulll down-payment at closing time, you're probably going to have to pay all the closing costs despite the sale not going through... – keshlam Aug 12 '15 at 16:54
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    Note that pre-approval is not the same as approval. Banks can and often do preapprove people, then refuse to approve them for the actual mortgage. Make sure you check the terms of the pre-approval. – ChrisInEdmonton Aug 12 '15 at 18:50

The definite answer is "maybe." A bank can demand that you have all funds readily available X number of days prior to a closing. On the other hand, if you have steady income, and today's shortfall is minimal, a bank may ignore it, and trust that you'll appear at the closing with the proper funds.

This is really a question for the bank. I'm sure members can produce anecdotes supporting an answer that goes either way.

From where I sit, as a Realtor, I'd expect a client to be pre-qualified for the amount they intend to borrow, and have access to funds for the downpayment. If the downpayment wasn't handy, I'd be sure the P&S bought them enough time to get it together and get the funding.

Last - it sounds like you are leaving yourself with no liquidity at all. That's a dangerous path, in my opinion.

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    The best example of not having the funds is when you are both buying and selling a house. The down payment for the new house may only be available when the first part of the transaction is completed. Of course all this is known at the time of application. – mhoran_psprep Aug 12 '15 at 18:13
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    "known at the time of application" is key. And you are right, the double-closing is common. A purchase contingent on prior sale. – JTP - Apologise to Monica Aug 12 '15 at 18:32
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    +1 for the "no liquidity" comment. Never spend EVERYthing just to have SOMEthing – MonkeyZeus Aug 12 '15 at 20:28
  • I agree with the liquidity thing. When the dust settles, we should have at least 2 months of liquidity in addition to steady income. Not a lot, but enough. So I suppose this is something I should bring up with the lender when we apply? – waldol1 Aug 13 '15 at 4:40

As far as the bank is concerned, you need to convince them that you will have the down-payment. By far the most reliable way to do so is to actuality have it. You don't have to cash out the investments for the whole thing yet, nut they will want evidence the money is available -- and a promise from relatives or whatever won't be accepted unless they're co-signatories on the loan, which is a can of worms usually better left unopened.

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