Equity Lines and Mortgage Funds = Seasoned Funds

This is a quick reminder that “cash out” from equity lines, second mortgages and first mortgages is considered to be “seasoned funds” no matter how recently the cash was obtained.

Lenders want to make sure all funds are “sourced” and “seasoned.” “Sourced” simply means that we know exactly where the funds came from – which bank account, which donor, which mortgage, etc.

“Seasoned” means the funds have been in an account for over 60 days (in most cases). But again – cash out from mortgages does not need to be seasoned.

Lenders of course do not allow unsourced or unseasoned funds to be used towards down payments or closing costs. Such funds are likely borrowed, and borrowed funds are also not allowed – unless they are tied to a mortgage.

Examples Of Using Mortgage Funds

We once had a buyer who wanted to use gift funds to buy an investment property, but lenders do not allow investors to use gift funds. So, we had the buyer turn the gift funds into a second mortgage (the donor took a deed of trust) against his primary residence and we had no issues with the purchase.

We also frequently have buyers who take out equity lines against their current residence to provide “bridge funds” for the purchase of a new property.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167

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