Mortgage interest rates and home prices are so low in the US, that many people are anxious to buy a home. But, buying a home requires finding a down payment. For FHA loans, you will need up 3.5% of the sale price of the home. For conventional loans, your lender will require as much as 20% down. Not everyone has this kind of cash sitting in a checking account. So, you’ll need to find creative ways to come up with your down payment to buy a home. Here are four tips to help you.
1) Use Your Tax Return
Tax season begins in about four months. It would make sense to start saving for your down payment now. Then, you’ll have some extra money to go with what you’ll get on your 2013 tax return. To maximize your upcoming return, have your Human Resources department change your withholding exemptions to zero. This will allow your employer to take out more taxes from your paychecks to be sent to IRS. All it takes is for you to complete a new 2012 W4 form with your employer, increasing the amount you receive on your return in 2013.
2) Use Your Retirement Funds
Most retirement accounts have penalties for tapping into them before retirement. However, there are usually exceptions when you’re borrowing from them in order to buy a home. Some will even allow you to withdraw your principal balance without being subject to penalties. Read the fine print of your retirement fund terms and conditions. If it’s too confusing, your local CPA can help you understand the current regulations.
3) Look into Down Payment Assistance Programs
Do some research to locate down payment assistance that you may qualify for to help you. Some are offered by state, county and city governments. Some are offered by different organizations. If you’re a veteran, either active or retired, you may be able to qualify for a VA Loan. These are loans that are backed by the US Veterans Administration. Also, check into US government down payment assistance programs. Many times, you can find programs that are offered to first-time homebuyers.
4) Get it From the Seller
This may sound crazy. But, you’d be amazed by how often it’s done. Oftentimes, a seller who doesn’t necessarily need the cash from the sell to buy another home to live in will be happy to loan you the down payment. They would simply write it up as a second loan if you qualify for a first. They may also be willing to pay the closing costs for you, which will cut the costs of buying a home for you.