Secured Borrowed Funds for Closing

Real Estate Agent with Tierra Antigua Realty SA624527000

Funds for closing costs must be from an "allowable source" and properly documented.  Unsecured borrowed funds are not allowable, such as a personal loan or advances from a credit card.  Secured, borrowed funds are allowable.  For example, a consumer can get a personal loan against the equity in a home they own to buy another home.  There needs to be a note with monthly payments and a recorded deed of trust securing the note against the property.  Evidence of receipt of the loan proceeds in the consumers bank account or in escrow is required.  The consumer could also tap Home Equity Credit Line (HELOC) against a property they own. The payment on the secured, borrowed funds will be used in qualifying the consumer.


Thinking about buying a home?  First thing a buyer should do is get pre-approved with a local lender.  Next, start a relationship with a Realtor.  I would recommend one with experience in the area you are looking and an experienced buyers agent.  Not all agents are the same, choose wisely.  Ask friends, family, or co-workers for referrals.  Same thing for lenders.  Or you can consider another source like Yelp or reviews.

Good luck, remember buying a home should not only be an exciting but an educational experience.


Comments (1)

Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Hi Spirit - good way to let the public know about what funds will be considered when seeking financing to purchase a home. Credit card use can cause a lot of havoc during a real estate transaction.

Dec 18, 2015 12:39 AM
Spirit Messingham

You got that right Lottie Kendall .  I know it sounds obvious but I make a point of explaining to clients that Title will cash their earnest money check and to hold off on any major purchases until after we close.  I still remember a buyer I had to help her return a fridge she had just bought at Home Depot for her 1st home as it put her over the edge and would have lost the loan.

Dec 18, 2015 01:00 AM