I'm Not Sure If I have Enough For A Down Payment - What Should I Do?
Perhaps you should reconsider the home and choose from some other properties which would fit your budget (this home will be your stepping stone towards the house of your dreams).
The amount you have available for a down payment will affect what types of loans for which you can qualify. Down payments typically range from 3 to 20 percent of the sales price for the property.
Here are some tips for Accumulating a Down Payment:
- Save- Look for ways to reduce your monthly expenses to save toward a downpayment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a few years for their down payment.
- Borrow the down payment from your retirement plan- Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a downpayment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.
- Move- You may be able to save additional funds if you can move into less expensive housing.
- Reduce other higher interest rate debt-Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.
- Make a deal with the seller- In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.
- Sell some investments
- Get a second job and save your earnings
- Skip a year's vacation
- Gift from Family- Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.
Documenting that the down payment comes from your savings and that you will have savings and/or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan.
Take extra care to document the sources for any monies to be used for the down payment or closing costs.
Acceptable Down Payment & Closing Costs Sources
- Cash in a bank account
- Mutual funds / stocks / IRA / 401K
- Proceeds from the sale of another property
- Gift from an immediate relative
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Disclaimer: The above Real Estate information was provided by Vincent Martinez, Realtor for the #1 Real Estate offices in New York and the #4 office in the USA. Vincent Martinez is a Certified Realtor Short Sale Professional by the Long Island Board of Realtors (L.I.B.O.R.) and a member of Prudential Douglas Elliman - Licensed Real Estate Broker. Vincent Martinez does not guarantee or is any way responsible for the accuracy of the information in this blog post and information provided is without warranties of any kind, either express or implied. Information here represents the opinions and ideas of the author; comments by others may not express the views of the author. I'm Not Sure If I have Enough For A Down Payment - What Should I Do? Copyright © 2009 By Vincent Martinez, All Rights Reserved.
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