Dreaming of homeownership often comes down to one critical factor: the down payment. For borrowers who need extra funds, selling personal assets can be a viable solution. But here’s the catch: lenders must ensure these funds are legitimate, properly documented, and not an interested party contribution.
Robert Grolemund, Regional Underwriter at Enact, explains the ins and outs of guideline navigation for borrowers selling personal assets to help fund their down payment. Knowledge checks are essential. Missing documentation or misunderstanding guidelines can derail a loan process, causing delays and frustration for everyone involved. Let’s dive in.
Are funds from the sale of personal assets able to be used for down payment?
Your borrowers may be surprised to learn that their personal assets may help them fund a down payment for their dream home. Items like vehicles, RVs, boats, collectibles, or other significantly valuable objects may be acceptable sources, provided specific requirements are allowed.
It’s also a best practice to proactively document the sale, especially in the event proceeds received from the sale of the personal assets are greater than 50% of the borrower’s monthly income. Documentation can help prevent borrower headaches.
Imagine this scenario: A borrower sells a vehicle to fund their down payment, but the bill of sale is missing or the buyer is an interested party. Suddenly, your team is scrambling for additional proof, delaying closing and damaging trust. These avoidable issues highlight why knowledge checks aren’t optional—they’re critical.
So what are the required documents you’ll need?
Guidelines for using funds from the sale of personal assets
Proceeds from the sale of personal assets are an acceptable source of funds for the down payment, closing costs, and reserves, provided specific documentation requirements are met and the transaction adheres to eligibility rules.
Eligibility Requirements
- Interested Parties: The individual or entity purchasing the asset must not be an interested party to the subject property sale transaction or the mortgage financing transaction.
- Asset Type: This applies to various non-real estate assets, such as vehicles, boats, recreational vehicles, or other high-value personal property.
Required Documentation
Lenders must exercise due diligence to confirm the value of the asset and the proper transfer of funds into the borrower's accounts.
The following documentation is required:
- Evidence of Value: Documentation verifying the fair market value of the asset prior to the sale. This might include an appraisal, a recognized valuation guide (like Kelley Blue Book for vehicles), or a recent listing.
- Bill of Sale: A signed, formal bill of sale or a similar contract documenting the terms of the sale, including the description of the asset, the sale price, and the transfer of ownership.
- Proof of Funds Transfer: Evidence that the funds were transferred from the buyer of the asset to the borrower. This includes copies of the check, wire transfer receipts, and corresponding bank statements showing the deposit into the borrower's account.
Selling personal assets can unlock homeownership opportunities—but only if those of us in the industry ensure compliance with documentation standards. Being knowledgeable and keeping borrowers informed aren’t simply best practices—they’re your safeguard against delays and customer dissatisfaction.
Dive deeper into handling this down payment fund option
By proactively documenting the sale of personal assets with comprehensive documentation, borrowers can effectively meet the underwriting requirements. Adhering to these specific standards before underwriter review can significantly streamline the asset verification process. Who doesn’t want a smooth closing? Stay in the know to help to eliminate common approval conditions and prevent errors for a faster path to homeownership.
For more specifics on how the GSEs handle personal property sales as down payment funds, always reference their selling guides – access Fannie Mae and Freddie Mac guidelines.
More ways we at Enact can help
When lenders verify documentation requirements ahead of time, they help borrowers avoid last-minute surprises. Position yourself as a thoughtful, proactive partner in their homebuying journey.
That’s why it’s important to keep the conversation going—because when we understand the tools available, we can empower more families to achieve the dream of homeownership. Our Regional Underwriting Team is available to assist you Monday-Friday 8am to 8pm ET at 800-444-5664 option 2.
Enact also offers a suite of tools—including Rate Express®, Underwriting Resources, and training resources to help you along the mortgage origination journey.
Source: Robert Grolemund is a Regional Underwriter at Enact Mortgage Insurance.
The statements in this article are solely the opinions of Robert Grolemund and do not necessarily reflect the views of Enact or its management.
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