Getting Money for a Down Payment on Your Home Mortgage Loan
With tighter lending standards across the board, it is no surprise that some mortgage lenders are requiring down payments. While many personal finance experts never stopped encouraging the 20% down payment rule, most people have gotten used to creative financing methods (such as piggyback loans) to effectively get a zero down mortgage. Now, though, some mortgage lenders are requiring as much as a 10% down payment. (You can still get FHA loans with a 3% down payment.)
So, if you need a down payment — no matter the amount — the key is getting the money. Luckily, there are some options for you in terms of helping you get a down payment together.
Ideas for getting money for a down payment
If you are looking for ideas for getting money for a down payment on your home mortgage loan, here are a few practical ideas that you can try:
- Savings plan. Figure out how much money you need to save for your desired down payment, and then decide how much time you need to meet that goal. Figure out how much money you need to set aside each month to reach your goal. Then re-do your monthly budget to make it happen.
- Sell some of your stuff. If you have a boat or a car or just a bunch of stuff you do not use anymore, sell it. Use eBay or have a garage sale. This can help you raise some quick cash to go toward your down payment.
- See if you can liquidate some of your investments. Now may not be the best time to sell stocks and mutual funds. But if you are looking for quick cash, and if your investments are worth enough, you can sell them.
- Borrow against your 401k. I wouldn’t do a withdrawal, since the taxes and penalties add up to destroy the value of what you withdraw. But you can borrow from your 401k and pay yourself back with interest. The bummer is that you miss out on the growth to your retirement fund from the capital that would have been sitting there.
- Ask for a gift. If you receive a true gift from relatives or friends, you can use it toward a down payment (it can’t be a loan).
Try one of these, or even combine some of them, to raise money for a down payment. You’ll save money in interest charges in the long run, and it may be the difference in whether or not you get the home mortgage loan.
Tags: down payment, 20% down payment, home mortgage loan, mortgage loan blog,
mortgage lenders, FHA loans, piggyback loans
August 28th, 2008 at 5:03 pm
Those are good options for a downpayment, but what about Seller-Funded Downpayment Assistance GIFTS! Yes GIFTS!!! Nonprofit programs like Nehemiah provide “Gift Funds of 1% to 6% of the final contract sales price”. Unfortunately, these programs are in jeopardy. I’ve been reading up on this issue and have found some great information from Nehemiah’s website. Members of Congress recently introduced The FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694). If passed and signed into law, this will allow downpayment assistance to continue INDEFINITELY. These programs need our help to get the word out. Visit www.DPAGroundSwell.org, a web-based community established to mobilize the growing industry opposition to the October 1 ban on seller-funded downpayment assistance.
August 29th, 2008 at 9:42 am
This is a good point. However, you do have to be careful, since some of these down payment assistance programs are little more than exchange programs, where you have to pay the money back through some other way (higher interest, certain payments, etc.). It is vital that you check into the program and make sure that it is approved by the FHA, and that it truly is a gift.
September 16th, 2008 at 1:17 pm
Nehemiah is not an exchange program. It is a legitimate non-profit. Here are their conditions:
Gift funds up to 6% of the final contract sales towards your downpayment and/or closing costs
Gift funds for both first time and repeat homebuyers
Gift funds for both new construction and resale homes
No repayment of gift money
No income or asset limits
No geographical restrictions
If you are a qualified homebuyer using an eligible loan program, such as an FHA loan, The Nehemiah Program can help you become a homeowner! For more information, visit their website www.getdownpayment.com
On another note … Great news for the DPA industry:
According to a recent article by: Matt Carter, Inman News, September 10, 2008:
“HR 6694 … is certain to pass the House of Representatives and has the blessing of the Department of Housing and Urban Development, Rep. Barney Frank, D-Mass., said at a hearing on foreclosures this weekend. The influential chairman of the House Financial Services Committee urged those attending a committee field hearing in Stockton Saturday to lobby the Senate — which shoehorned language banning seller-funded gifts into HR 3221, the sweeping housing bill signed into law July 30 — in support of the bill. Frank said the bill that would give seller-funded gifts a reprieve, HR 6694, has the support of HUD Secretary Steve Preston because it also addresses an issue near and dear to the department’s heart — risk-based pricing. HR 6694 … will pass the House, I can guarantee you. What you want to do now obviously is talk to your senators. We think it will go through there — it has the approval now of the Secretary of HUD.”
We’re making progress here. Don’t give up. Let’s do what Rep. Barney Frank suggested … Contact your Senators TODAY!