So, how to you find the downpayment money to buy your first home? With home prices in the US well into the hundreds of thousands, this means coming up with even a 5% downpayment can be next to impossible for most people, especially the first time home buyer looking to obtain a loan.
Here are some ideas how you can come up with the downpayment money:
Savings: This one's easy - if you have money saved in the bank, most people will use part of all of this money for a downpayment.
Borrow Money: Many people borrow money for a downpayment. They may borrow from a relative, friend or even take a loan from a 401k or 403b retirement plan. If you do decide to "borrow" the downpayment, be sure to review of all the consequences first. For example, if you take a loan from a 401k plan, you may be reducing your future growth in your retirement account if you take a loan.
Sell Stuff on eBay or Craigslist: This was one thing we did when saving for our second home (we didn't know about eBay.com
when we bought our first home). You'd be surprised how many things you have around the house, or even stuff you forgot you had at your parents' house! Try taking stuff you don't need any more and sell it on eBay to make extra cash for your downpayment. You can also try to sell stuff on
Craigslist, which is free and a really easy way to make some extra cash.
Have a Yard Sale: Believe it or not, many people have lots of stuff around their home that they no longer need and you can sell it to make a few extra bucks.
Have Someone Give You Money: Ok, we weren't this lucky :-), but some friends of mine have had relatives give them money for a downpayment on their first homes. I guess it cannot hurt to ask a parent, grandparent or other close person in your life if he or she would be interested in giving you a "gift" to use as your downpayment. You may have to provide documentation of this gift (usually a signed letter from the gift giver) when you apply for a loan/mortgage to show how you obtained these funds.
There is also a program offered by QuickDown.com which is an agency that facilitates the delivery of 501(c)(3) non-profit organization grants or ("gift" funds) to cash challenged home buyers to be used for a downpayment and/or closing costs for purchasing a home. This program is for available in conjunction with first time home buyer loan programs, but you cannot contact QuickDown directly; you must ask your mortgage broker/lender about this program to see if you are eligible.
Another great website to use in conjunction with QuickDown is Grants.gov, which will help with applying for and requesting any type of grants (not just those for first time home buyers).
The IRS will allow a one-time withdrawal of up to $10,000 from a Traditional or Roth IRA without penalty, if you are under age 59 1/2. Certain restrictions apply, so be sure to check out the IRS website for more information.
Check out this article regarding the possibility of using the new tax credit (The American Recovery and Reinvestment Act of 2009) toward a downpayment for your first home. The tax credit is available to qualified home buyers who purchase a home throught mid-2010.
Note: Regarding this topic of downpayment money - All references to the word "downpayment" on this website are written as one word. Although many people do spell it as two words (down payment), many people search online for "downpayment" and think of it as one word. So, for simplicity reasons, I chose to write it as a single word.