Can I use money from my business account for a down payment?

What does Fannie Mae require?

Fannie Mae's Selling Guide (B3-4.2-02) says business assets can be an acceptable source for the down payment, closing costs and reserves. You must be listed as an owner of the account, and the lender verifies it with statements, the same as a personal account. Large deposits that aren't normal for the account may need an explanation. If your qualifying income comes from the same business, the lender also applies Fannie's self-employment income rules, which look at the business as a whole.

What about FHA loans?

HUD's Handbook 4000.1 lets an FHA lender skip business tax returns for some self-employed borrowers, but only when, among other things, the funds to close aren't coming from business accounts. So if you plan to use business money, expect to provide two years of business tax returns along with your personal returns.

How should I move the money?

• Talk with your accountant first about how a withdrawal affects the business and your taxes.
• Tell Tom before you move money, so the transfer can be documented cleanly.
• Keep statements showing the money leaving the business account and arriving in yours, if you transfer it.
• Leave enough in the business to keep it running; lenders look at the business as an ongoing source of income.

See letters of explanation for large deposits and the self-employed guide.