Is the lack of down payment holding you back from purchasing a home? It doesn’t have to! Coming up with a down payment is faster and easier than you think.
Borrow Funds From Parents
Asking parents for help to purchase a home is not unheard of and is a common course for may first-time homebuyers. Tax laws typically allow each parent to gift up to a certain amount without tax consequences; however, check with your CPA for more information about these allowances.
If your parents aren’t willing to gift you the money, consider asking them for an unsecured loan instead. Negotiate a fair interest rate from your parents --it may even be lower than that from the bank or a money-market account.
It may seem odd to talk about paying back a family member in a such a formal way, but when it comes to borrowing large sums from family, it’s best to keep it as orderly as possible. Write down the terms, make sure that everyone understands them, and keep excellent records of all transactions.
Set Up an Automatic Savings
The most efficient and fastest way to grow your down-payment is to make deposits into your savings regularly. It can be difficult to make regular deposits if you're not disciplined about it, but even the most inconsistent saver can quickly build up their funds by setting up automatic savings.
Consider saving $200 from every paycheck. If you’re paid every two weeks, at the end of 12 months, you would have saved about $5,200 --not including interest!
Save Your Tax Refund
Retailers know all too well the temptation that a generous tax refund holds, which is why you’ll see advertisements luring you to spend it with them during tax season. However, remember that even one regular tax refund might be all you need for a down-payment for a home.
Before you make other plans on how to spend your refund, set up a savings and remind yourself of your ultimate goal of purchasing a home.
Sell Stuff on eBay or Hold a Yard Sale
It's astounding the amount of money you can make on eBay --without it become a full-time job. Have a collection that you inherited? Designer clothing or accessories willing to let go in the name of buying a home? Even lots of gently used toddler clothing can fetch a generous amount on eBay or Craigslist!
A yard sale is also a quick way to make hundreds of dollars, depending on what you have to sell. Clean out the garage, your closets, the attic, the basement, and don't forget those rented storage units (you’ll also save money on the monthly rental fee).
If you haven't used it in a year or you don't consider the item an heirloom, it’s probably a good idea to let go of it. Another bonus of getting rid of excess items is that you’ll have less to move when you purchase your new home!
Ask the Seller for the Down-Payment
Sellers are often more generous with their negotiations if you pay their asking price. You can ask the seller to give you the down payment as a credit or to pay for your closing costs --or even both!
Various lenders have conditions as to how much you can receive as credit for a down payment. Call our office for more information, and we'll work with you to get the maximum amount
Look Into Government Programs
Many government programs can also help you with your down payment, especially if you are a veteran or a first-time home buyer. Some counties also offer special buying programs. Our office is familiar with all the lending options in the area and can assist you in finding a program that matches your needs.
Ask Your Employer for a Raise
If more than a year has passed from your last pay increase, it's reasonable to ask your boss for a raise. Make a list of the value you add to the company, everything from boosting morale and arriving in a timely fashion every day to business deals you've brokered or exceeding daily production quotas. Remind your employer of the value to add to the company, and they'll likely reward your value with a raise. Also, when negotiating a raise, start at the higher end. Too often, people underestimate their worth or what they believe they can get. You may just get what you ask for!
Also, when negotiating a raise, start at the higher end. Too often, people underestimate their worth or what they believe they can get. You may just get what you ask for!
Get a Second Job
A second job is easier than ever with side-gigs such as Uber, Lyft, and DoorDash. You can choose your hours and work as much or as little as you want. The downside of this course, however, is that often the highest paying times are late weekend nights and you can't rely on a specific amount every week. For something more reliable, consider a short-term position such as seasonal work during Christmas.
Get a Better Paying Job
Most home loan advice will discourage you from taking on a new job as some lenders prefer long-term employment from their borrowers. However, if the field of work is the same, a new position should not affect your loan application.
Dip Into Your Retirement Funds
Some retirement accounts allow you borrow for the purpose of buying a home. Ask your CPA for more information about borrowing from your retirement as some accounts will let you take out the principal balance without getting penalized.
Have more questions about purchasing a home? Call for a no-obligation consultation!