Ways to Accumulate Your Down Payment

Do you want to take advantage of the market and buy a home?  Here are a few tips  that may help you come up with your down payment or reduce closing costs

n   Have your parents 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. With 20% down the whole downpayment may be in the form of a gift. Less than 20% down, the buyer should be prepared to put down 5% of their own funds.

n   Borrow against your 401K or insurance policy.

You can also cash out your 401K but you will be subjected to withdrawal penalties and payment of taxes. If you borrow against it, the loan payment will be counted as a debt.

n   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. (Payment may not be counted as a debt when down payment is 20% or more.)

n   Obtain a low point or zero point loan.

This will reduce the amount of your closing costs substantially. In some instances, the lender can also pay all or a part of your non-recurring closing costs.

n  Ask the seller to pay for all or a part of you non-recurring closing costs.

(On loans to $240,000 seller may also pay recurring costs.)

Your real estate agent can assist you with this when you make an offer on a home.

n   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.

n    Check into city and/or county down-payment assistance programs.

n  Close escrow late in the month to reduce the amount of prepaid interest on the loan.