You have a lot of options for coming up with the down payment for a house purchase. Find out which of these possibilities you can work with.
If you’re trying to purchase a property, coming up with the down payment will be one of the many financial hurdles you have to sail through to make this possible. As daunting a task as it may seem, there are actually a lot of ways that can help you put together the down payment to secure the house you want. Review these options and see if any of them are right for you:
1. Savings – If you’re still in the deciding stage whether to buy a house or not, it would be wise to start putting away some money into a fund now. You can do this by opening an account that will earn the most interest, and depositing money into it every month. To keep things simple (and get you to deposit diligently), opt for an automatic electronic transfer with your bank.
2. Assets – If you have a vehicle or any valuable miscellaneous asset, sell it. Buy a much more affordable (even a second-hand) replacement and use the remaining money for a down payment. Furthermore, try to recall if any people owe you money and call them to collect. You should also think twice about spending that tax refund and save it for your down payment instead.
3. Insurance – If you have a permanent life insurance policy, talk to your provider and find out about your options regarding cashing it in or borrowing against it to buy a house. Proceed with caution when taking this route, though: using life insurance money may be more viable for senior home buyers, not people who are taking care of a young family and therefore need insurance the most.
4. Family – If your parents or other relatives are well-off enough, you can try borrowing from them. To make things official, consult a lawyer regarding how to proceed with the arrangement. Have him draw up a plan for paying back the loan with details like how long the loan will run for, how much you’ll pay each month and what the interest rate will be.
5. Seller/Builder – Find out if the seller of the home you want to buy would be willing to cover the closing costs if you push through with the purchase. If you’re still house hunting, tell your real estate broker to look for sellers that will agree to this deal.
Before pursuing any of these options, make sure that you check with your mortgage lender and see if they have rules about certain down payment sources. Also, before zeroing in on a down payment option, be sure that you understand and are prepared for the consequences that come with it.
Jillian Cariola, Writer