Coming up with the down payment for a home is often the hardest part. Whether you are inpatient and want to buy a house now, before you have the money, or you have just been struggling to find a way to come up with enough cash, we have the answers for you. Here are a few simple ways to have enough money to get the home of your dreams sooner than you thought possible.
Get a Gift
Oftentimes, first time homebuyers have a hard time coming up with even the 3 percent minimum down payment that Fannie Mae and Freddie Mac require. On a $250,000 home, that would be $7,500, which is a lot to swallow when you are just starting out. If you have a little bit of your own funds, asking a relative for the remaining funds could still allow you to get approved. The key is that the money needs to be a gift, which means it will never need to be paid back. If it is considered a loan, the lender would have to include it in your debt to income ratio.
Borrow from your Retirement Funds
If you have a 401K or IRA, you may be eligible to take a loan out of these funds in order to fund your down payment. Of course, these funds will have to be paid back during a specified period of time, which should be considered carefully. Before you take the money out, read the fine print or talk to a professional about your choice to take the money from this fund to make sure that it makes financial sense.
Many people have things laying around their home that they no longer use but which could be treasures to someone else. If you are in this situation, sell your items and use the money towards your down payment. If the items are big ticket items, make sure that the funds from the sale can be sourced through the use of proper bill of sales or receipts. The bank will need to source where your money came from for the down payment and if the funds cannot be sourced, the income cannot be used.
Take a Second Job
Sometimes it is necessary to work a little harder to get what you want. A second job could help you have money to sock away while you save for that down payment. You won’t have to work the second job forever, unless you get in over your head with a high debt to income ratio, but it will provide you with the funds you need to get into the home of your dreams.
Pay off Debts
Do you have a lot of debt that takes up your monthly disposable income? Before you try to purchase a home, try paying these debts down. You can then use the money you save by not having these bills any longer to save for the down payment.
If you look around, there are typically many ways to make money for a down payment. You just have to get a little creative or flexible in your thinking. The easiest way to do it is to get a gift from a family member but since that is not always a possibility, it is best to have a backup plan as suggested above. Each of these scenarios would be temporary, yet would allow you to have the home you desire. Remember, the more you put down, the lower your private mortgage insurance is and the less time you will have to pay that PMI because you will hit 80 percent LTV sooner.Click to See the Latest Mortgage Rates»