Seven Ways to Accumulate a Down Payment

One of the biggest problems facing homebuyers today is coming up with enough money for the down payment 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.

1. Have a relative 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 $10,000.00 per year to another person without having to pay a gift tax.  Technically, your mother could give you $10,000.00 and give another $10,000.00 to your spouse.  Your father could do the same.  This would give you a total of $40,000.00 towards a down payment and closing costs.  (NOTE:  Unless you are putting down at least 20% or are obtaining a government-insured loan, 5% of the sales price must be your own money.)
   
2. Borrow against your 401K or insurance policy.
   You can also cash out your 401K but you will be subject to withdrawal penalties and payment of taxes.  If you borrow against it, the loan payment will be counted as a debt.
   
3. 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.
   
4. 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 part of your non-recurring closing costs.
   
5. Ask the seller to pay all or part of your non-recurring closing costs.
   Your real estate agent can assist you with this when you make an offer on a home.
   
6. 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.
   
7. 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 requires lower down payments and assist with closing costs.  There are also city and county down payments assistance programs you can check into.