Coming up with a Down Payment

Everyone wants to own a home, but you have to pay a hefty down payment to purchase a home. Most of the lenders and banks demand a 20% down payment. But if you don’t have a 20% down payment and still want to buy a home, in this case, you will need to pay PMI (Private mortgage insurance). PMI is an insurance that protects the lender if a borrower fails to make payments. If the mortgage is under 80% of the purchase price of the home, then PMI goes away. If you go for buying a house with PMI, then its cost will also add in your monthly installments. Generally, you have to $40 to $80 every month for every $100000 borrowed.

Here I will discuss some options for you to buy a home with affordable down payment.

Down payment assistance programs

Down payment assistance programs are administrated by local or state housing authorities, a nonprofit organization, by banks or lenders. Qualified homeowners can get a set amount of money, and they can use this amount to cover their down payment. For example, many banks have programs to help those who are looking to buy a home.

Federal Housing Administration (FHA) offers loans to low to moderate-income persons through FHA approved banks or loans. US government supports these mortgages making it risk-free for lenders. These programs are more favorable for borrowers than conventional programs. The qualified borrower will only pay a 3.5% down payment than 20%. If the credit history of any borrower is not perfect, then the FHA program can be helpful for such a person. A credit score of above 580 is considered eligible for such programs.

If a person is having a credit score 500-579, he has to put at least a 10% down payment. To assist the veterans and active-duty of military persons, there is a VA loan, and they can get a mortgage at 0% down payment.

Your retirement Funds

Certain retirement accounts allow you to borrow money for buying a home. You can check these details and regulations with the help of an accountant. There are some retirement accounts from where you can take out principle balance without paying for any penalty.

Selling your belongings

You are going to buy a new house, you may have some old things that you want to sell and can make money by selling these. Like an old car, if you sell an old car, you will earn cash. This cash can help you to raise funds for the down payment. You can use online selling websites for this purpose.

Gift from family

Although it does not seem an ideal option, you can ask from your favorite aunt, grandparents, or any other friend or relative who has a lot of cash. Gifting cash can be win-win for both of you. If someone gifts you money for a down payment, they are not only helping you, but they can get a tax write off from it.

The Internal Revenue Service’s (IRS) allows people to gift or donate money; they will get tax exemption on this gifted amount. The maximum amount to get an exemption from tax is $15000.
If you can’t get gifts, then consider borrowing money from your family or friends and come up with a repayment schedule.