Buying a home can be very exciting but one of the biggest hurdles can be the down payment. There are several ways to get money for a down payment, it could be saving, a 401K account or even a gift.
Saving money for the down payment is the most common way to get money. However it can take awhile to get enough money. Make sure you are saving money in a bank, we can’t use money that you are saving at home. We need to be able to document the funds used in the transaction and money saved at home usually is not acceptable.
Gift money is another option for some people. If you have a family member that can help you, it can be a great way to get your down payment. The gift can come from family members such as parents, siblings, grandparents. Check with your loan officer about the requirements. The donor will have to sign a gift letter stating that the funds do not have to be paid back. We need to document the transfer of funds from the donor to the borrower.
Some people may want to use a retirement account for the down payment. There are a couple ways to do this, either a 401K loan from your retirement account or a early withdrawal from your account. Some employers have requirements about using your retirement account. Remember if you are taking an early withdrawal, there will be a 10% penalty if you are under 59 1/2.
Using a second mortgage for a down payment may be an option. If you have equity in your current home, you may be able to take out a second mortgage to use as a down payment on a new home. This is not very common but if you are keeping your current home as a rental, it may be an option. Others look at this if they are planning to sell their home after buying the new home. There are times you want to buy before selling and using your equity allows you to get access to the equity for a down payment.
Look into down payment assistance programs. For first time homebuyers, there are many different programs that you may qualify for. There are some programs that can be used even if you are not a first time homebuyer. MN Housing has a program for first time homebuyers and another one that can be used for a move up buyer. Check with your lender for possible assistance. We have a grant for a first time homebuyer that can help if you qualify. Usually there are income requirements.
Check with your loan officer and see what you might be able to do. I will meet with clients to help them get ready to buy a few months ahead of time. That way homebuyers know what they need to do and how much money they will need. That way you have time to plan and you will be ready to go when you find the home you want to buy!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
