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One of the biggest problems facing potential
homebuyers today is coming up with enough money for the downpayment
and closing costs. The amount of money you have available can
greatly limit or increase your purchasing power. Rather than
saving all of the money yourself, there are options that may help.
Here are some ways to accumulate the necessary funds that are
acceptable to most lenders.
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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. This would give you $40,000 for a downpayment and
closing costs. (Note: Unless you are putting down
at least 20% or are obtaining an affordable housing loan, 5% of
the sales price must be your own money.) You should consult your tax advisor for guidance.
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Borrow against your 401(K)or insurance policy.
You can also cash out your 401(K) but you will be subject to withdrawal
penalties and payment of taxes. If you borrow against it, the loan payment
may be counted as a debt. You should consult your tax advisor for guidance.
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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.
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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, with higher pricing (i.e., rate).
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Ask the seller to pay for all or a part of your non-recurring closing costs (within allowable limits).
Your real estate agent can assist you with this when you make an offer on a home.
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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 downpayment.
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Consider different loan programs.
Your loan officer can help you in determining the best loan program to suit your needs. There
are a wide variety of programs that require lower downpayments and assist with closing costs.
There are also city and county downpayment assistance programs you can investigate.
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Equal Housing Lender
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