Seven Ways to Accumulate a Down Payment

Mortgage programs typically require a 20 percent down payment, but few people have that much cash reserved. There are some home loan products that require less, such as FHA loans that require 3.5 percent down, but the larger the down payment, the lower the mortgage will be. Here are some tips on how to find the money for your down payment.

1. Receive a larger tax refund. If you have difficulty saving money, you can decrease the number of withholding exemptions you claim on your workplaces tax form. While your paycheck will be reduced due to your employer paying more to the I.R.S., this can lead to a larger tax refund.
2. Borrow money. Many borrowers ask relatives for money to help purchase a home. Tax laws will allow relatives to gift a certain amount without tax consequences. Of course it's best to consult with a tax professional to learn the maximum others can contribute. You could even ask relatives for an unsecured loan with a better rate than they could get at a bank or in a money-market account, and the rate would still likely be less than what you would pay an official lending institution.
3. Make regular deposits into a savings account. Many employers offer to pay employees through direct deposit with the option to deposit certain amounts into multiple accounts. If you were to contribute $200 from a biweekly paycheck, you would have saved $5,200, excluding interest, after a full year.
4. Sell unused possessions on the Internet or at a garage sale. Most people have more items in their home than they could possibly use. Take a careful inventory of your entire home, including in your attic, all of your closets and under your bed, and determine what items you no longer use. If you haven't used something in a year, sell it.
5. Ask the home seller to contribute. If you pay the seller's asking price, you could be surprised at what they will do for you. They may be willing to give you the down payment as a credit, pay your closing costs or do both. Consult with your lender before asking, as certain restrictions may apply.
6. Research Government programs. Those who have served in the armed forces may qualify for a VA loan, and the government has several down payment assistance programs for first-time homebuyers. Some counties also offer special programs to increase home ownership in certain neighborhoods. Consult with your lender to learn what options are available to you.
7. Take a second job. Even seasonal work during the summer or the holiday season can help you save up funds for a down payment. It is a sacrifice to work part time at a second job, but it doesn't have to last long.

These strategies can help you find the money for a down payment. Contact me today, and together, we can determine which options are best for your individual needs.