Keep your down payment in a liquid, accessible account until closing day
Your down payment should sit in a savings account or money market account at a bank or credit union where you can withdraw it quickly without penalty. The lender will ask to see bank statements showing the money has been there for at least two months — this proves you saved it yourself rather than borrowed it last week. A regular checking account works too, as long as the balance is stable and documented.
Do not keep a down payment in stocks, bonds, retirement accounts, or cryptocurrency. Lenders will not accept these because their value fluctuates and because some accounts have withdrawal restrictions or tax penalties. If you must liquidate investments to fund your down payment, do it early enough that the cash sits in a bank account for the full two-month seasoning period the lender requires.
The account does not need to be in your name alone if you are buying with a co-borrower. Joint accounts work fine. If a family member gave you money as a gift, you will need a signed gift letter from them stating the money is a gift and does not need to be repaid — the lender will ask for this along with bank statements showing the gift deposit.
Key Takeaways
- Keep your down payment in a savings or money market account at a bank or credit union, not in investments or retirement accounts.
- Lenders typically require two months of bank statements showing the money in place before they will approve your loan.
- If someone gave you the money as a gift, get a signed letter from them stating it does not need to be repaid.
- Do not move the money between accounts repeatedly or make large unexplained deposits right before closing, as this raises questions during underwriting.
- Wire the down payment to the title company or escrow agent only on the day of closing, using instructions they provide directly to you.
Why lenders care where your money comes from
A mortgage lender needs proof that you have the down payment and that you saved it yourself. This is called funds verification, and it is part of underwriting. The lender pulls your bank statements to confirm the money exists and has been there long enough that you could not have borrowed it overnight.
If you deposit a large sum into your account one week before closing, the lender will ask where it came from. If you say a family member gave it to you, they will want a gift letter. If you say you sold something or got a bonus, they may ask for proof — a pay stub, a bill of sale, a tax return. The goal is not to catch you in a lie; it is to make sure you are not borrowing money to cover the down payment, because borrowed money changes your debt-to-income ratio and your ability to repay the mortgage.
Seasoning requirements vary by lender and loan type. Conventional loans often require two months of statements. FHA loans may allow shorter seasoning periods or accept gift money more flexibly. Ask your lender what documents they need and when, so you can gather them without rushing.
What happens to your down payment after you sign
You do not hand over your down payment at the moment you sign the mortgage. Instead, you wire it to the title company or escrow agent — the neutral third party handling the closing. This usually happens one or two days before closing, or on closing day itself.
The title company holds your down payment in an escrow account until the sale closes. At closing, they use it to pay the seller (along with the mortgage lender's funds), pay property taxes and insurance, and cover closing costs. You will receive a closing disclosure showing exactly where every dollar went.
Never wire money to anyone except the title company or escrow agent, and never use wiring instructions that came to you via email. Call the title company directly using the phone number on their official website or your closing documents, and ask them to confirm their wire instructions by phone before you send anything. Wire fraud targeting down payments is common, and once the money leaves your bank, it is nearly impossible to recover.
Keeping the money safe while you wait
Your down payment is your own money, so standard bank account protections apply. The FDIC insures deposits up to $250,000 per depositor per bank, so if your down payment is under that amount and the bank fails, you are covered. If your down payment is larger, split it between two banks to stay within the insurance limit.
Do not invest the down payment money in hopes of earning returns before closing. Even a high-yield savings account earning 4 or 5 percent is fine — the interest is small and the money stays liquid. But stocks, bonds, or other investments expose you to the risk that the value will drop before you need the money, and they complicate the verification process.
If you are waiting several months between getting a mortgage pre-approval and actually closing on a home, keep the money in a high-yield savings account. The rate is better than a regular savings account, and the money is still available instantly if you need it.
Handling down payment money from gifts or loans
If a family member is giving you money for the down payment, they need to provide a gift letter — a signed statement saying the money is a gift and does not need to be repaid. The lender will provide a template or tell you what information to include. The letter should state the amount, the date, and the relationship between you and the giver.
Once the gift money arrives in your account, it counts toward your two-month seasoning period. The lender will want to see bank statements showing the deposit and the money sitting there for the full two months.
If you are borrowing money for the down payment — from a family member, a personal loan, or a line of credit — the lender must know about it. Borrowed money counts as debt and affects your debt-to-income ratio. Some lenders will not allow you to borrow the down payment at all. Others will, but only if the loan has a long repayment term and low monthly payment. Ask your lender before you borrow anything.
Moving money between accounts before closing
Avoid moving your down payment between accounts in the weeks before closing. Every transfer creates a paper trail, and the lender has to trace it back to the original source. If you move money from one savings account to another, then to a checking account, then to a money market account, the underwriter will ask why and may request statements from each account.
If you must move the money — for example, because you are switching banks — do it early and keep records of every transfer. Document where the money came from originally, and provide statements showing the money in its final account for at least 30 days before closing.
Large cash deposits are also a red flag. If you deposit $50,000 in cash into your account, the bank will file a Currency Transaction Report with the IRS. This is normal and legal, but it creates a record that the lender will see. If you are planning to deposit cash, do it well before closing so the lender has time to ask questions and you have time to explain.
Frequently Asked Questions
Can I keep my down payment in a money market fund instead of a bank account?
Yes, as long as it is a money market account at a bank or credit union, not a money market mutual fund. Bank money market accounts are FDIC insured and the money is accessible within a few days. Money market mutual funds are not insured and can take longer to liquidate, which creates problems if you need the cash quickly.
What if I need to use part of my down payment before closing?
Tell your lender immediately. Using down payment money for anything else — a car repair, medical bills, credit card debt — changes your financial picture and may affect your loan approval. The lender will want to see updated bank statements and may ask you to document where the money went. In some cases, you may need to save additional funds to replace what you spent.
Do I need to keep my down payment separate from my regular spending money?
Not legally, but it is a good idea. If your down payment sits in the same account where you deposit paychecks and pay bills, the lender will have to trace through months of statements to confirm the down payment amount. Keeping it in a separate account makes verification faster and reduces the chance of questions during underwriting.
What if the title company asks me to wire the down payment to an account I do not recognize?
Do not wire it. Call the title company directly using the phone number on your closing documents or their official website, and confirm the wire instructions by phone. Scammers sometimes intercept closing emails and change the wire instructions to steal the down payment. Verification by phone is the only safe way to confirm where your money should go.
Can I use a credit card to pay the down payment?
No. Lenders do not accept credit card payments for down payments because credit card debt counts as a liability and increases your debt-to-income ratio. You must pay with funds from a bank account, a cashier's check, or a wire transfer.