Life...Fun and Kentucky Real Estate


7 Tips for Coming Up with Down Payment Money

Need down payment money? Check out the good ideas below...

Money for house downpaymentZero down loans are (almost) entirely a thing of the past. While many wanna-be buyers are tucking their down payment pennies away, many of these folks feel that they’re missing out on deals in the meantime!

Here are my top 7 tips for coming up with those critical down payment funds:

Know how much you need to save. We all know that to reach a goal, you have to set a clear target. So, first things first: figure out exactly how much of a down payment you actually need. If you have a credit score of at least 620, you may be able to qualify for an FHA loan that only requires a 3.5% down payment. (For a $200,000 house, that’s $7,000.) Check in with your agent and mortgage broker regarding (a) whether you qualify for an FHA loan and (b) whether you’ll be able to find a property that works for you and for the FHA within the realm of what’s affordable for you.

It’s true – the conservative lending guidelines on FHA loans will limit how much you can spend, and require you to pay monthly private mortgage insurance (PMI), if you put less than 20% down.  But PMI is tax deductible and eventually goes away.  So what this really means is that you’ll more than likely end up with a mortgage payment that you can easily afford to pay for a long time to come.  And it might be less house than you might be able to buy with a higher-down payment, less conservative loan, but less is more, people.  Less is more (especially when it comes to mortgage payments!).

Also, while no-down-payment loans are almost extinct, there is a little tiny exception for borrowers employed in a certain set of professions: doctors, lawyers, dentists and C-suite executives of Fortune 500 companies are all potentially eligible for zero down professional loans offered by a couple of small, private banks.  These loans do have the basic credit and income requirements, but they require ZERO down payment, because these professionals are perceived as posing a very low risk of foreclosure.  In some cases, pros can qualify for up to $1 million with no down payment!

Save your dough in a high-interest online savings account. Regular bank savings accounts are paying right around .10% interest right now.  Ally and SmartyPig are paying somewhere between 2 and 3 percent.  Every little bit helps, right?

Sell your junk. eBay, anyone?  Not only does selling the stuff you no longer need or use generate cash to put into the down payment kitty, it has the side effect of feeling almost like preparation for moving. Clear out your clutter, make room for your new life as a homeowner, and make a few bucks at the same time.  That’s what I call a #WIN.

Get a side gig – Blogging, weekend table-waiting, baking, dog-walking – it’s not overkill to get a second job or start a small side business to help you either pay down your debt or save up toward your down payment.

Borrow it from your city or state.  The federal homebuyer tax credit is history, but many state and local governments still offer incentives for homebuyers in the form of down payment assistance programs. Most often, these are second mortgages with very low or no payments for 5, 10 or even 30 years (in Oakland, California, for example, the down payment loan doesn’t have to be repaid for 30 years or until you sell or move out).  And many will help not just low-income buyers, but also those with moderate incomes, or anyone buying their first home!

Google <your city> <your state> and <down payment assistance> to see what your local government has on offer, and what it takes to qualify.

Borrow it from yourself!  If you have a 401K or Roth IRA account and some years to go before retirement, you might be able to tap into it or even borrow against your own funds for your down payment.  Currently, you can take up to $10,000 out of your Traditional IRA with no penalty to put toward the purchase of your first home, but you will be taxed.  You can take as much as you want out of your Roth IRA contributions with no penalty or taxes, though, and as much as $10K from your earnings penalty-free for your down payment.  The rules get a little tricky, here, so definitely check in with your tax and financial advisors.

And while you can’t similarly draw from your 401K, many retirement and pension plans
will allow you to borrow the money against your funds, then repay it to yourself – at interest.  Hmmmm, pay your lender back with interest, or pay interest to yourself – choose you!  But first, get some advice from your CPA or financial planner.

Get the gift that keeps on giving.  Cash gifts from relatives are seen by many lenders as a legitimate resource for down payment funds.  There are guidelines, though - some lenders require that you put your own money on top of a small cash gift (less than 5% of the purchase price); but will let you use gift money exclusively if the gift is 20% of the home's price or more.  Also, most lenders require a "gift letter" documenting that the giver is your relative and is not expecting you to pay the money back.

Check in with your mortgage broker for a briefing on gift-money guidelines.

If it seem like a "gift" is a hard thing to come up with - don't dismiss the concept too soon.  I know more than a few now-homeowners who had no clue where their down payment money would come from until they were reminded about gift money as a strategy, then cashed in long-ignored offers of help from parents, aunts and uncles. 

Source: Trulia - By Tara-Nicholle Nelson


With smiles,
Bo in Yukon

Bo Kociuba, Yukon Realtor

Search Homes in Yukon, Mustang and Greater OKC Metro

Bo Kociuba, Realtor®
Serving Oklahoma City Metro - Yukon, Mustang, Tuttle, Piedmont, Newcastle, Bethany, Oklahoma City and Edmond

Let's get connected:

Follow Me on TwitterFollow Me on FacebookLets get LinkedinMy Outside Blog





Comment balloon 2 commentsLizette Fitzpatrick • August 01 2010 11:00PM
7 Tips for Coming Up with Down Payment Money
Need down payment money? Check out the good ideas below… Zero down loans are (almost) entirely a thing of the past. While many wanna-be buyers are tucking their down payment pennies away, many of these folks feel that they’re missing out on deals… more
Super Savers- Ways For You To Tighten Up- Increase Your Profits
Love, LOVE, LOVE these great ideas to save money! Just think hw much money you could save for a down payment on a home?? Super savers- Ways For You To Tighten Up- Increase Your Profits. We are all responsible for our own finances,… more
Nightmare Closing--Surely This is Not Real!!
There's always one more thing to learn about closing on a house. If you plan to buya home be sure you do not have an expired driver's license. It is asked for at closing and a copy is made. I had always thought it was done because of the… more
You Are Who You Associate With.. or at least that's often how it…
My thoughts exactly. Time to surround yourself with peeps that bring a smile to your face. Times are stressful right now for most. There's no hiding that. So any way we can 'reduce' stress is a benefit to our lives. I ran into… more
Ramsey's Weather Forecasting Stone - Lexington KY
Ramsey's Weather Forecasting Stone - Lexington KY I love to have lunch at Ramsey's in Lexington KY My usual location is the one near Woodland Park I had taken my assistant, Jane to lunch and as we sat out on the patio we noticed… more
Home Buyers, Don't be Offended… Just get Pre-Qualified.
I'm not kidding when I ask new buyers if they have talked to a lender BEFORE touring homes. It wastes everyone's time if you can't even qualify for a loan. It's not a scary process, only a necessary one before you look at homes. If you have a… more
Trim The Fat Off Your Overweight Business!
Trim The Fat Off Your Overweight Business! Every now and then I stop to take a look into where I can drop some services for some extra money to try something different. Today, I was able to save $1327. 88 a year! My first call was… more
Fannie Mae Tightens Up on Appraisals
All I can say is it's about time! The appraisals lately have killed many deals. Hope the new rules from Fannie Mae help and not hurt. Fannie Mae Tightens Up on Appraisals Since the new appraisal rules went into effect last year there has… more
Picnik Before and After Photography - Castle Post Lexington KY
Picnik Before and After Photography - Castle Post Lexington KY I love to take a picture and see what all I can do with it on Picnik. Here's a few before and after pics I worked on today to go in my Send Out Cards I couldn't decide which one… more
Are You On The Top Of The World Using Picnik and Send Out Cards?
Hey Ma! I'm on Top of the World! Life is so easy now that I create new pictures out of old ones with Picnik They work wonderfully well on the Send Out Cards I send to everyone. As I was looking through my pictures today, I ran across… more
Don't Throw Out That Sexy Pink Refrigerator!
Don't Throw Out That Sexy Pink Refrigerator! Ahhhh… "those were the good old days, " my Mom and Dad used to say I can well remember the story of an old Sears refrigerator that they carted all over Wyoming to Laredo Texas… more
Do you play GUESSING GAMES with your potential buyers?
Many times as I show empy homes, my buyers have to imagine how their furniture might look in an odd shaped room. Also sellers need ideas on how to stage rooms to apeal to buyers. Below are some excellent ideas for my readers today! Do… more
Great ideas here… TOP 10 BEST WAYS TO GET YOUR HOME SOLD FAST Tricks of the trade to help get a sold sign in your yard! #10 PRICE IT RIGHT THE FIRST TIME Find out what your home is worth and than take 15% to 20% off the price. If you do this you… more
Get out your permanent markers, HUD seeks public comment on three…
Hey Kentucky Realtors and lenders… take a moment to make your vote count. You can make a difference - you have 30 days to comment against FHA's proposals With a difficult economy and possibly some new FHA… more
Horse Mania 2010 - Lexington KY - LexArts - Horsemania
Horse Mania 2010 - Lexington KY - LexArts - Horsemania It's time once again to see all the beautiful LexArts painted horses that will be displayed all over Lexington KY for the Horse Mania 2010 event. I was thinking about this as… more
It is just a place to chase the old lady around in!
As a terminal renter I can understand renting. The past 6 years I have finally owned a home so I know I will never go back to being a renter if I can help it. I love the freedom of doing what I want with the house. I've… more
For Rent Scams On Your Listed Home
For Rent Scams On Your Listed Home I read about this a few years ago where schemers would put a listed house up for rent on Craigslist. Now it happened to one of my listings. Last night someone called me to see if my listed house was for… more
Lexington KY Home For Sale - But No Takers
Lexington KY Home For Sale - But No Takers Until this past year in Kentucky, it was easy to get houses sold for a good price. There were even multiple offers everywhere! Yes, we Realtors(R) were almost order takers! Ahhhh… life was good… more
Happy Father's Day - James W. Fitzpatrick Jr. - July 26, 1931 - July…
Dad, I stopped by to see you today. Yes, I know… it's been a long time. Last September maybe. I know I don't need a reason to visit your grave but when I was here last, I wanted to show you the car I had bought. You are the car collector… not me… more
Written In Stone - Dry Stone Conservancy - Rock Fences - Lexington KY…
Written In Stone - Dry Stone Conservancy - Rock Fences - Lexington KY - Bluegrass Written in Stone? The rock fences of the Bluegrass are in danger of disappearing. Over time, we have lost hundreds of miles of historic rock fences… more