SEVEN WAYS TO ACCUMULATE
A DOWN PAYMENTt
One of the biggest problems facing potential homebuyers today is coming up with enough money for the down payment and closing costs. The amount of money you have available can greatly limit or increase your purchasing power. Rather than saving all of the money yourself, there are options that may help. Here are some ways to accumulate the necessary funds that are acceptable to most lenders.
1) Have a family member give you the money as a gift
Documentation will be required to prove that the money is actually a gift and not a loan. Any taxpayer is permitted to give up to $10,000 per year to another person without having to pay a gift tax. Technically, your mother could give you $10,000 and give $10,000 to your spouse. Your father could do the same. This would give you $40,000 for a down payment and closing costs. Unless you are putting down at least 20% or are obtaining a government insured loan, 5% of the sales price must be your own money. FHA loans now also allow these gifts to be repaid in the form of zero interest loans.
2) Borrow against your 401K or Insurance Policy
You can also cash out your 401K, but you will be subject to withdrawal penalties and payment of taxes. If you borrow against it, the loan payment will be counted as a debt in qualifying.
3) Sell or Borrow against an asset
Selling an asset such as a car can help increase the amount of money you have available. Borrowing against an asset is also acceptable as long as you qualify with the additional debt. Make sure you document that you own the item that you are selling (copy of car title etc.).
4) Obtain a low point or zero point loan
This will reduce the amount of your closing costs substantially as long as you qualify at the higher interest rate. In some instances, the lender can also pay all or a part of your non-recurring closing costs.
5) Ask the seller to carry back financing
If the Seller does not need all of the equity in their property, they may be willing to carry some of the financing, which will reduce the amount of your down payment. Certain limits apply, so please ask your lender for details.
6) Ask the seller to pay for all or a part of your non-recurring closing costs Your real estate agent can assist you with this when you make an offer on a home.
7) Consider different loan programs
Your loan officer can help you in determining the best loan program to suit your needs. There are a wide variety of programs that require lower down payment and assist with closing costs. There are also city and county down
payment assistance programs you can check into.