How Should I Plan the Money for My Down Payment and Closing Costs?

Your savings may be in a checking account, an investment account and a retirement account. I'd like us to look at the accounts involved before you start moving money toward the purchase.

Identify where your down payment and closing-cost funds will come from, then review the account documents and any planned transfers with your lender before moving the money.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation.

In my preparation process, we discuss the source accounts and documentation before we're working toward a contract deadline.

Put the full purchase amount beside your available funds

Your down payment is one part of the amount to plan for. The CFPB's Closing Disclosure explainer distinguishes closing costs, prepaid expenses, initial escrow deposits and the final cash-to-close amount.

We can review your estimate together and identify which costs it includes. I'd also like to know how much you want to keep available after buying, so the transfer plan fits the rest of your finances.

The mortgage reserves guide explains funds a lender may require you to have left after closing. We will confirm any reserve requirement for your loan alongside your own savings preference.

Identify the source before deciding on the transfer

The examples below are Fannie Mae guidelines. Your lender must confirm which funds and documentation your actual loan permits.

Money you plan to use	What we need to discuss
Bank savings	Fannie Mae's asset verification guide describes statements and other verification methods for documenting funds. We will identify the relevant accounts and requested periods.
Stocks or mutual funds	Fannie Mae's investment asset guide requires verification of ownership and value and sets conditions for documenting receipt of sale proceeds. We will confirm what your transaction needs.
Retirement savings	Fannie Mae's retirement account guide calls for ownership, vesting and access to be verified. The account balance alone doesn't answer those questions.
A gift	Fannie Mae's personal gift guide sets eligibility and documentation rules, including a gift letter stating that repayment is not expected. We will review the plan before the donor transfers funds.
Proceeds from selling your current home	Fannie Mae's sale-proceeds guide distinguishes an estimate from the actual proceeds that must be documented. We will discuss how your sale and purchase dates fit together.

The guides to gift funds and selling stock for a down payment explain those situations in more detail.

Should I move retirement money before talking to my lender?

Retirement assets can have different jobs in the file. Under Fannie Mae's retirement asset guidance, funds used only as reserves do not have to be withdrawn. Money you plan to use for the down payment or closing costs needs its own review.

If you're considering borrowing from a retirement plan, we should discuss that specific arrangement as well. The 401(k) loan article covers that separate question. An account withdrawal and a plan loan should be identified as separate options in our conversation.

Keep the records connected as money moves

My advice is: "If you have to move funds around from a retirement account or an asset account into your bank account, let's talk that through so that we're not scrambling at the last minute and having to source things, the paper trail, and all that."

In an invented planning example, your purchase funds come from a brokerage account and savings. We can review both accounts and discuss the transfer before treating the money as ready for closing.

Please keep the records for the accounts and transfers involved. The document organization article suggests a way to group them so we can review the original account and the receiving account together.

Common questions

Should I move all my savings into one account before applying?

I'd discuss the plan with your lender first. We can identify the accounts and records that apply to your loan before deciding which transfers are needed.

Does a retirement account have to be emptied to count as reserves?

Under Fannie Mae's retirement account rule, qualifying retirement assets used as reserves do not have to be withdrawn. Your lender still needs to verify the account and confirm its eligibility for your loan.

Can a family gift be part of my purchase-funds plan?

It may be possible, depending on the loan and gift eligibility. Please tell me about the proposed gift before the transfer so we can confirm the donor, documentation and terms your lender requires.

Can we plan the money before I choose a home?

Yes. We can identify your source accounts and intended transfers early, then update the amount needed as the property and closing figures become clearer. The preparation checklist puts that conversation beside the other steps.

Please tell me which accounts or other sources you're considering before you move the purchase funds, and we can work through the plan together.

Estimates and educational information are not a loan approval or commitment to lend.