Can You Change Your Mortgage Down Payment After Your Offer Has Been Accepted?

Buying a home involves a lot of big money decisions and calculations, one of which is figuring out how much of a down payment you can afford. But things can happen between the time you sign a contract and your closing date, which could cause you to rethink how much you want to put down.

In many cases, you may be able to make some minor adjustments to your down payment amount, but it’s not always a given. Here’s what you need to know.

[Read: Best Mortgage Lenders.]

Can You Change Your Down Payment Amount Before Closing?

The answer is it really depends. “You can change the amount of your down payment after the offer has been accepted on a home but will need to confirm with your lender and Realtor before making such changes,” says Shelby McDaniels, channel director for Corporate Home Lending at Chase.

That’s because major changes to your deposit amount could affect your loan eligibility and therefore impact the sale of the home going forward.

Here’s one way to think about it: “Theoretically, the terms of the contract are allowed to be changed by the buyer as long as they don’t impact the seller,” says Nicole Rueth, senior vice president and producing branch manager of The Rueth Team at Fairway Independent Mortgage Corp.

In other words, if you decide to put extra money down so you can have a lower monthly payment, there is virtually no seller or lender that would try to stop you. “If you opted to increase your down payment, it could potentially make the loan approval quicker and even strengthen your offer for the sellers,” says McDaniels.

But if you want to put down less than the percentage in your contract, that’s when things could get tricky.

Here are a couple of scenarios:

— You originally intended to put down 15%, but after the home inspection, there were a couple of issues that came up, and you decided it might be better to keep back some money to make repairs or upgrades. You have strong income and credit, so you’ll still qualify for your loan with 10% down, and it won’t impact the sale.

— Because of extenuating circumstances, some of the money you had earmarked for a 10% down payment is no longer available. Because the lender approved you based on verifying those available assets and now you no longer have them, you might no longer qualify for your loan. Although you can try for a different loan program, the seller may have the right to walk away.

[Read: Best Mortgage Refinance Lenders.]

What Impact Will Changing Your Mortgage Down Payment Have?

There could be additional fees. Making changes to your down payment will result in having to revise your loan documents. This also gives lenders leeway to change your closing costs without restriction.

It can push back your timeline. “Changing your down payment amount once an offer has been accepted may delay the closing process as you wait for your lender to review your loan changes for a new approval,” says McDaniels.

You could lose your loan. Because loan approval is based on the specific loan product and scenario, putting less down could negate the loan approval and the agreement with the sellers in some situations, says McDaniels.

Can Sellers Reject Your Offer After You Change Your Down Payment?

Just changing the terms does not terminate the contract, says Rueth. But if you had the down payment money and spent it, it means you’ll now have a higher monthly payment and a change to your debt-to-income ratio. If you no longer qualify under those terms, it can blow up the sale. You could also lose any earnest money you put down, says Rueth.

Some sellers could also reconsider the offer if the lender’s updated review takes too long or if the change makes the buyer less favorable financially, adds McDaniels.

In order to prevent this from happening, it’s important to understand the terms of your contract and to discuss with your lender and real estate agent if and how changes to your down payment might cause the sale to fall through.

[Read: Best Home Equity Loans.]

Alternatives to Changing Your Mortgage Down Payment

If you find yourself in a situation where you needed to spend some of the cash that you were planning to use for your down payment, there are a few ways you could replace the money:

Tap into your 401(k). Although using your retirement funds is not ideal, you could consider taking a withdrawal or a 401(k) loan if you’re coming up short. This will have tax implications, and every plan has its own rules, so make sure you understand the repercussions.

Use money from an IRA. The IRS allows first-time homebuyers to withdraw up to $10,000 from their individual retirement account penalty-free. This could be helpful, but the downside is that you’re using up funds that had growth potential for your retirement years.

See if a relative is willing to give you a gift. Lenders allow relatives to contribute to a down payment as a gift, but it requires documentation. You’ll need a gift letter and proof that shows the money transferred from the relative’s account to yours.

How to Avoid Needing to Change Your Mortgage Down Payment

Making small changes to your down payment amount can be a strategic move in certain situations. But doing so because of a miscalculation or because you spent money you shouldn’t have is not ideal. Here are some ways to ensure you don’t work yourself into a bind:

Crunch the numbers early on. “Before starting their home search, prospective buyers should work with a home lending advisor to determine their budget, how much home they can afford/put toward a down payment, what loan options are best, and get preapproved for a mortgage,” says McDaniels.

Find the sweet spot. So how much should you put down? While a higher down payment may offer buyers a more favorable interest rate and lower monthly payments, you don’t want to leave yourself too short. “I’m a big believer in not necessarily putting the minimum down, but putting as little as possible to capitalize on the rest of the assets,” says Rueth. That way, you can be perceived as a serious homebuyer, and still keep some cash for other things you want to do.

Research down payment assistance programs. Especially for first-time homebuyers, there may be resources available to help with your down payment. For example, Chase Home Lending offers a Homebuyer Grant up to $5,000 in low- to moderate-income neighborhoods that can be used toward closing costs when a customer purchases with a DreaMaker Mortgage. Bank of America offers two grant programs for low-income borrowers: One is a lender credit up to $7,500 to put toward closing costs or to buy down the mortgage interest rate; the other is a grant up to 3% of the home purchase price or $10,000 to go toward the down payment in certain markets.

Be disciplined once you go to contract. You don’t want to raise any financial red flags right before you buy your home. Do some budget tightening and practice living below your means, and don’t apply for any new loans before you’ve closed on your house.

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