Where To Get The Money For A Home Down Payment

A good down payment is essential when buying a home, as it’s directly tied to the length of your mortgage, cost of the home and your bargaining power with the bank. However, it can be tough to find the money for a down payment, especially when 10-20% of a loan is expected. There are several common methods for finding the cash.

Many buyers get help with a down payment from family members or friends, but while this is certainly something to consider, there are risks involved. If a portion of a down payment is loaned, it’s important to have a loan agreement drawn up with repayment terms and interest (if applicable). Even if you’re borrowing from a trustworthy family member, a loan agreement avoids future complication and protects all of the involved parties. Loan agreement templates are available online, but if you can afford to do so, it’s best to pay a lawyer to draw up the document for you, especially when borrowing money from a friend.

The federal government has a number of loan programs to help first-time home buyers and, if you qualify, these are great low-interest options for making a down payment. The most commonly used programs include VA loans, which are only available to veterans. Talk to your real estate and home loan agent for more information on government loan programs if this is an option that interests you.

The simplest and least expensive option is to simply make the payment yourself. There are many costs associated with home buying, and many buyers don’t feel that they’ll have money left, but consider every possible source of income before making the decision to look into loans.

Tax rebates and retirement savings programs can be great resources. Roth IRAs, for instance, allow tax-free withdrawals for first-time home buyers. You can also reduce your withholding exemptions a year in advance to increase your tax rebate by taking more out of pocket, which can be a good strategy for buyers who can’t save well on their own. Think about selling a few possessions and drawing as much as possible from your savings account. Remember, a bigger payment now will mean lower mortgage payments in the future, so consider every possible resource to handle as much of the down payment as you can.