October 28th, 2015 9:50 AM by Jackie A. Graves
The more money you have to put down, the
more choice you’ll have in terms of purchase price range and monthly payment
The down payment: It’s the
biggest test of our ability to save money most of us will ever face, and one
that stands between us and our ability to become a homeowner.
It can be tricky, but down payments can be seen as an
opportunity and less of an obstacle.
The more money you have to put down, the more choice you’ll have
in terms of purchase price range and monthly payment amount. And building a
little cash cushion will definitely give you piece of mind once you’re in your
Here are a handful of lesser-known sources for boosting your
down payment stockpile.
1. Lean on your city
Google your city, county, and state
websites, and look for links for residents, housing, or homebuyer assistance
that can help you.
Gone are the times when
nationwide programs allowed for the zero-down loan, the federal homebuyer tax
credit, and the use of tax credit funds toward down payment and closing cost
Where have all the down payment assistance programs gone? Local.
The best programs of this sort are now largely operated by local
governments, primarily cities and counties — and the rules for qualifying vary
widely. Some operate exclusively for buyers with low or moderate incomes;
others are dedicated to helping first-time homebuyers. Many of these programs
have a limited pool of funds that may run out over the course of the fiscal or
calendar year, and almost all of them require buyers to jump some major hoops,
such as completing homeowner education classes and choosing a home that meets
Some state and local programs in areas that were particularly
hard-hit by the 2008 recession also offer bonuses for buyers who agree to
purchase a bank-owned home or a property in a designated economic recovery
Google your city, county, and state websites, and look for links
for residents, housing, or homebuyer assistance to find these programs. And be
sure to trust only websites that end in .gov — scammers posing as governmental
agencies abound. Local real estate agents and mortgage brokers often know the
ins and outs of these programs too.
2. Get by with a
little help from your friends (and relatives)
Most mortgage programs will allow for some portion of your down
payment to come in the form of “gift money,” which is exactly what it sounds
like: money someone gives you to help you buy a home. And while gift money may
sound great, taking gift money from a relative can create relationship issues
or come with emotional strings attached.
It also typically comes with lender strings attached. Lenders
frequently require that gift money be accompanied by a letter that clearly
states the money is a gift, not a loan. The lender may also want to see a bank
account statement from the giver proving that the money was theirs to give.
Most may think of gift money as large gifts allowable
exclusively in the context of a familial relationship, but some programs allow
any general well-wisher to contribute any amount to your cause, whether or not
they are a relative. The FHA Bridal Registry program allows couples to open a
down payment registry account with their lender and to deposit checks into that
account from anyone who wants to contribute to helping a couple become homeowners.
3. Ask your employer
Universities and municipal departments that employ first
responders such as police and firefighters frequently make down payment and
other home-buying assistance programs available to staffers. Large employers or
even smaller companies seeking to lure top-level recruits do something similar:
relocation assistance programs.
Check in with human resources to explore whether any such
assistance is available — and if you happen to find yourself a hot prospect on
the job market, consider trying to negotiate relocation or down payment
assistance into your offer package.
Tighten your budget
Get gut-level real with yourself about what’s truly important to
you. If the answer is buying a home, then it’s time to examine your spending
and look for the leakage you can stop up. That’s cash you can redirect to your
down payment savings.
If you spend $20 a workday on oatmeal and coffee at breakfast
and your takeout lunch, that’s at least $400 per month — almost $5,000 a year
you could be saving. And those numbers are not inflated to reflect big-city
prices. Nor is the $100-a-month cable bill, the $15 yoga class, or the $2,000
Instead, bring your lunch from home, stream TV shows and movies
online, and rally your friends to take a workout class together from one of the
streaming sites you’re paying for. Cut hotel costs by renting a private room or
small apartment on a site such as VRBO or Airbnb.
The key is to click out of money-spending autopilot and to
transfer the saved money into a separate down payment savings account.
5. Borrow from
There are situations in which it may make sense to borrow a few
thousand dollars from yourself via your 401(k) or IRA.
Some retirement accounts allow you to borrow against or pull out
funds, penalty-free, to apply them toward your down payment on a home. Is it
advisable for everyone, in every situation, to deplete their 401(k) or IRA to
plug that cash into a house? Absolutely not.
But if getting your down payment to the 20% mark by borrowing
from your 401(k) gets your mortgage interest rate down and allows you to repay
that cash to your own retirement account (versus to your mortgage lender) with
interest, you and your financial adviser might agree that this move is right
By Tara-Nicholle Nelson – To view
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