subject: Finance Your New Home—Where do I Get My Down Payment? [print this page] Finance Your New HomeWhere do I Get My Down Payment?
Presently, prices of Phoenix homes for sale are at historic lows, interest rates are at historic lows, and house inventory is at historic highs. One would think that the market would never get better for today's home buyer. Some buyers still have one challenge, though. Even though they have great income and credit, they may be short money for the down payment and closing costs. Here are a few ideas on possible sources for you to gather up your down payment.
Withdrawal/Loan From 401k or IRA
Have you been saving for years for retirement, but haven't saved for a house down payment? Many 401K plans will allow you to borrow against your 401K and pay yourself back with interest, thus allowing you to use the funds for your down payment. Since you're paying yourself back, the lender doesn't even include this debt in qualifying you. In addition, many IRA plans will allow for a withdrawal for the down payment on a primary residence. Be sure to consult your tax advisor in case there are tax implications
Gift From a Relative
Do you think that someone in your family may be willing to help you out with the down payment? Maybe it is a good time to ask. With the right documentation, FHA allows a family member to gift you the total down payment.
Loan From a Relative
Family member can't or won't gift you money? Perhaps they'd be willing to lend it to you instead, with you making payments and with an executed document outlining the terms? Let's face it -- not all family members may be willing to give you money but they may be willing to lend it to you! If this is an option, discuss with your lender so that they may guide you through the necessary documentation and requirements of a relative's loan.
Collateralized Loans
Did you know that you can use funds that you borrow against your secured investment accounts or real property? This could be another source for your down payment. The funds must be fully secured by the asset. Examples of such assets would be stocks, bonds, cars, boats, etc.
Sale of Personal Property
You can sell your cars, recreational vehicles, stamps, coins, baseball card collections, etc. to obtain your down payment. Before doing this you should consult with your lender so that the necessary documentation can be provided, but this is another great way to come up with a down payment for your Phoenix Arizona home.
Saving
Well, when all else fails, maybe it's time to get a savings plan started. If you're like many people, you may find that having money automatically withdrawn from your paycheck and deposited into a separate bank account works well. This gives you the opportunity to budget your monthly expenses based on your take-home pay and you can do your best to ignore your growing savings account. By putting the money in a separate account you may not be as tempted to use the funds.
Low Down Payment Loan Programs:
FHA Loan
Many buyers are working with FHA loans on their new purchase. FHA allows for a down payment as low as 3.5% of sales price and very competitive interest rates. FHA also allows for the seller to pay up to 6% in closing costs.
VA Loan
If you are a veteran of the military, first of all -- thank you for your service! And second of all, you are likely eligible for a zero-down-payment program! In addition, the seller can contribute approximately 4% of your closing costs. This means you can virtually get into a home with no out-of-pocket expense!
Conventional Loan
Requires 5% down and the funds cannot be gifted. However the seller is allowed to contribute up to 3% towards your closing costs.
As you're shopping the Phoenix Real Estate market, planning your financing is an important item to consider. Our Phoenix AZ Realtors are not only specialists in scouring the Phoenix MLS to find the ideal home for your budget, they're also highly experienced in the process of getting your financing in place. Give Jamie Thompson and The Thompson Group a call today or visit www.Ask4Jamie.com and we can help make your home purchase a reality!
