Finding Your Down Payment

Why You Need a Good Down Payment

With the mortgage market continuing to struggle, the days of getting a loan without a down payment seem to be all but over. Lenders are making it increasingly difficult to get approved for a new mortgage and one of the main sticking points is the down payment. While no one likes being forced to have a hefty down payment, it’s probably worth your while in the long run. A sizable down payment can really benefit the buyer – it’s less money they’ll have to borrow and it’s less money they’ll have to pay back with interest. Not only that, a down payment provides instant equity in their home, which can later help when taking out a home equity loan or line of credit. In certain cases, making a down payment of at least 20% of the home’s price can also allow the buyer to forego mortgage insurance completely. Still, coming up with a down payment is easier said than done for most people. Some people save for years to get a large enough payment, but if you’re in need of some extra cash for yours right now, try some of these tips:

Finding Your Down Payment

• Do you have some assets you can sell off or no longer need? A used car, boat, or some type of collectible can take care of a good portion of your down payment without much work on your end!
• Have you been investing in your 401(k) for several years? You may have enough to take a loan out from. While 401(k) loans have interest rates, the good news is you’re actually only paying interest to yourself.
• Are you due a major tax return this year? Wait until you receive your tax return and put it all toward your down payment.
• If you can carefully time out exactly when you plan on buying your home and needing a down payment, you could wait until you receive your annual bonus or raise from work to take care of it.
• Do you have some old savings bonds or a mutual fund you’ve been waiting to cash in on? Now is the perfect time to make use of these investments, as long as you’re not taking a substantial amount of money away from your retirement.
• Find out if your state or local government offers a homebuyer’s or down payment program. These programs can get you the money you need for a down payment now, which you pay back later.
• Finally, if you’re still struggling to come up with a down payment, wait and save for 6-12 months. During this time, you should set up some type of automatic savings program, so that a certain percentage of each check you earn goes toward savings for your down payment.