Depending on your location the percentage of a mortgage down payment for a home can vary from state to state. 20% or 22% is common and these days’ banks are less inclined to agree financing a 100% mortgage loan. So unless you have a benefactor like a rich aunt to help you out, you’d better put on your thinking cap to work out where you are going to get this lump of lucre?
- Joking aside, we have all heard the saying that charity begins at home. So if you do have a relative with funds it’s worth checking out if they’d be prepared to put up an interest free or low interest loan. If it’s interest free then obtain a "gift letter" from the person who gave you the money, verifying the money doesn’t have to be repaid.
- Here’s an old fashioned, idea open a savings account with your preferred lender and put aside a chunk of money after each paycheck. If you are engaged to marry or considering a permanent commitment you can open a joint account. You need to do this for at least a couple years if $1000 a month is a possibility you could get a $25,000 deposit together after a couple of years of saving.
- If your employment package includes stock options you could consider cashing these in. Check out your company policy on rules when applying.
- If you have stocks consider selling these where penalties are small compared to cashing in on 401(k)’s and IRA’s which have massive penalties if you cash in early. “An exception to penalties on withdrawals from retirement accounts that lets first-time homebuyers withdraws up to $10,000 from an IRA to use as a down payment on a home purchase”. Consult an accountant about any tax implications
- Cash in a with profits life insurance policy but do weigh up the surrender value against the loss of cover for loved ones.
- Check if your company participates in an “Employer Mortgage Assistance Program” for a $600 - $6,000 loan at 2% interest rate?
- Get a Co-Owner to enlist with you as a partner to share costs including any down payment and to be responsible with you for paying the mortgage loan. Ask your advisor to give you relevant details.
- Get on the state gravy train and take advantage of state loans and grants available for this, you may need a government insured FHA mortgage. For a modest fee consult a HUD qualified housing counselor.
- Save thousand$ in closing costs and you may currently use up to 6% of a FHA loan towards closing costs.
- Negotiate with your lender for the amount charged for the loan arrangement origination fee and this can contribute towards part of the closing costs or see if the lender can consolidate the closing costs into interest paid over the loan term and consult with a non-profit housing councilor to help you compare the true cost
- Some sellers may cover closing costs but this is a less common practice as the market is swinging in favor of sellers
- Try out your realtor for a discount on their commission. They can only say no and may say yes to keep your business
- If you are relocating for employment your employer just may agree to contributing a payment towards a down payment in place of a relocation package
- Borrow up to $50,000 from your 401(k). Some companies allow their employees to borrow up to 50% of amount invested (capped at $50,000). Get independent advice from an accountant as well as your company HR about pitfalls and repayment requirements.
These are just some of the ways you could raise the money but do consider and research the consequences of the options if you follow them. The safest and surest way is to save some money each month and accrue interest. For those who can’t wait for some years until they have enough for a deposit then other options mentioned here can be considered.
Comments (1)Subscribe to CommentsComment