For those dreaming of owning a home, the thought of coming up with money for a down payment is enough to scare many perspective buyers away. However, even if you don’t have the necessary funds for a down payment in the bank, there are other options that you should take into consideration to come up with the money you need to put a down payment on your dream home.
The easiest way to get a down payment for a home is to borrow against one’s retirement account. Many people have been investing in a 401(k) plan or traditional IRA for years, and first-time homebuyers may borrow up to $10,000 for their down payment without incurring a penalty. For those who are self-employed—or if your employer allows it—you can also borrow up to $50,000 from your current 401(k) and pay yourself back over five years at a low interest rate.
In addition, you can do some research and look for down payment assistance grants. Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low-income and moderate-income individuals and families who wish to achieve homeownership.
Family is another option that you may want to take into consideration when it comes to securing funds for a down payment. Sure, you may be too proud to want to ask for money, but if your family can help you and your family move into your dream home, isn’t it worth it? If you do get help from a family member, the lender will ask you to sign a form called a gift letter, attesting to the relationship. The lender may also require your parents to explain where they got the money and prove that they are financially able to make such a gift.
If you’re still not finding the money to put together for a down payment, there’s always the creative lease/purchase agreement. Homeowners who can’t sell their homes in this market will be more amenable to cutting a deal with buyers and may be willing to take part in a lease/purchase agreement, where you rent the home you want to buy and a percentage of your rent is applied toward the down payment. If you go this route, make sure you get a contract outlining all the details so both parties are safe.
Adding a down payment option to your wedding registry is gaining popularity among those just starting out in life together. Several mortgage companies allow those getting married to set up a down payment registry. What a great way to celebrate the joining of two people in holy matrimony than to help them buy a house.
If none of these things will work for your specific situation, there’s always the old fashioned “saving for a rainy day” tactic. Try putting aside 10 percent of your paycheck each week and make an effort to bring a lunch to work instead of going out. If you’re married, use the money you would spend on birthday, anniversary and Christmas presents and put that toward your down payment. You might also need to forget that vacation this year. It may seem like a lot, but the sacrifice will be well worth it when you’re living in your new home.
For more tips on how to save for a down payment, contact our office today.
By Keith Loria
If you are thinking of buying or selling an home in Maryland give me a call at 410-292-0100 or start your search here and we'll talk about the market conditions and what your home could possibly be worth in today's market place if you are thinking of selling. If you are considering buying a home, there is no better time than now to buy. The tax savings and wealth building alone is worth the plunge into todays market. Century 21 New Millennium is part of the largest nationwide relocation company and can assist with your move here in Maryland or anywhere in the United States or abroad. Ask me how.
In keeping with saluting our heroes, during 2012 I am waving flat fees for active duty military, retired military and the families of fallen military, as well as policemen, firemen and emt's. If you enter into a contract by the New Year's eve I will waive the flat fee at settlement. This is a $395 savings. If you are thinking about buying or selling a home give me a call and receive full service real estate assistance from an experienced agent. Our office is open 7 days a week and we can be reached at 410-730-8888 or I can be reached directly at 410-292-0100.
June Piper-Brandon ~ Associate Broker, CDPE, CIAS, ePro
