Down-payment Options

Down Payment Options

A down payment is often the biggest obstacle for home buyers, especially first time homebuyers. But before you get discouraged, consider these options. There may be a rock you haven't turned over yet!

Pull from Savings
Obvious, but not always possible in this economy.

Borrow from Your 401(k)
Check with your plan administrator to see if your company will allow you to borrow, if there are limitations on what you can do with the cash, and what the interest rate will be on the money you borrow.

Withdraw Up to $10,000 from Your IRA
If you have an individual retirement account (IRA), the IRS allows you to withdraw up to $10,000 for the purchase of a first home. For those of you who have purchased a home before but haven't owned a home in the last 3 years, you're considered to be a "first-time buyer" for this specific purpose and can make a withdrawal.

Sell Stock Options
If stock options are part of your employment compensation, selling them might earn you cash. Contact your human-resources department to learn the rules.

Gift from Parents or Family Members
Your family members or parents may be willing to help you get your first place.

Borrow Against Your Life-Insurance Policy
Life insurance policies ("universal", "variable universal life" or "whole life" policies: not “term” policies) grow in value as you pay into them. When enough value has accumulated, you can take cash out or borrow against them. Talk with your Insurance Agent to learn your options. Caution: Withdrawing money from a policy could reduce or eliminate your death benefit, leaving your family in financial trouble if you die. You also can lose coverage if you borrow against the policy but don't pay it back. Ask your insurance agent to outline the pros and cons.

Tax Refund
Getting a refund? Congratulations! Use it to buy your home (the big screen can wait).

Increasing Your Paycheck
Use your tax money now! Go to your payroll department and ask for a W4 form so you can decrease your tax withholding.

Sell Your Car
If you have a car or more than one car, you should think about selling it in order to obtain instant funds to use towards your home down payment. Need the car? Do you have a boat, motorcycle, collectibles or other assets?

Check with Your Employer
Some corporations, universities and local and state governments have programs to provide employees with down-payment assistance. These programs are meant to help keep valued employees in their jobs and closer to work. Check with your Human Resources department.

Negotiate
A seller can’t fund your down payment but underwriting guidelines allow buyers accept help with closing costs. Using an FHA loan, you can accept up to 6% of your home's purchase price toward your closing costs. Conventional loans limit the help you can accept to 3% of the price if your down payment is 10% or less; it's 6% with a down payment of more than 10%. Your seller can help with closing costs. Make sure your real estate agent negotiates this into your offer.

First Time Home Buyers Program
Depending on your qualifications there are first time home buyers programs being offered even in this market. These programs will help you with your down payment or closing costs. Call me for more details

* Send me my free first time buyer’s guide.