It seems as though the elephant in the room when it comes to buying a home is the down payment and where or how to come up with it if you don’t have it.
Let’s face it, buying a home requires some sort of down payment unless you are fortunate enough to be eligible for a VA loan or a USDA loan. The VA loan and the USDA loan are the only true no down payment 100% financing programs around in 2012. So if you don’t want to buy a home in a rural area with a USDA mortgage and you aren’t eligible for a VA loan then you’ll be stuck with coming with at least 3.5% or more for a down payment.
So, with knowing that you’ll need a down payment next comes the topic of where or how to come up with it if you don’t already have it in the bank.
1. Your Family – if you are going to go the least amount down one of the best options for down payment assistance may be your family. FHA loans allow for all of your down payment to come from a family member. This is unlike conventional financing which requires you to have 5% of the sales price as your own funds before you can get help from your family member. If you plan on working with a family member for your down payment make sure you speak to your loan officer first before any money is exchanged.
2. Your 401K – you may think that your 401K is off limits until you retire – if this is you – then think again. Most retirement plans have some sort of provision that allows you to borrow from it for the purposes of buying a house. Borrowing from your 401K can be a great place to get money and the repayment of the money only goes back to you which means all that you borrow stays with you.
3. Your Coffee Cup – ok this isn’t that funny – more on a serious note – where is your disposable income going? What are you spending your money on? This can be a serious gut check. Starbucks and the Escalade are nice lifestyle choices, but they can get in the way of home ownership. If you look around, you can find ways to save significant amounts of money that will add up over time. Can you make coffee at home or do you have to buy it on the run? Chances are – home is a good answer more times than not.
4. Your Local Government – Just about every local government in the US has some sort of down payment assistance program that provides funds for low to moderate income families. Down payment money in many of these programs comes in the form of a forgivable loan or grant that requires you to live in the home for a specified period of time like 5 years or more.
Plus 1 – just like your local government, your employer may have a home purchase program that may be worth your time checking into. Municipalities and government agencies often have some type of down payment and or first time home buyer programs that provide some sort of financial assistance for buying a home. Checking with your HR department may be one of the best things you could do for yourself if you are looking to purchase a home.
Hopefully if you follow some of these methods you could get into home ownership quicker than you were thinking. If you want to see where you stand with qualifying, please fill out the form below.