You’ve finally found the perfect home and it’s time
to make a move! That’s great news for both you and the seller but there is just
one thing; you need to come up with the down payment. If you’re one of the
lucky ones with enough money in savings to cover the down payment than you have
no problem but many home buyers do not have enough cash for this up-front cost.
So now what do you do? Here are 10 great ways to get the cash you need to make
your dream come true!
Liquidate!
If you try hard enough you just might be able to
raise the cash by selling some things that you own. It all depends on how badly
you want to get into that new home but what about selling something that you
really don’t need? My first thoughts would be your motorcycle, a second car,
boat, anything that you don’t really need. You can replace it later and this is
a great way to raise the cash you need without too much trouble. If the timing
is right you could use your tax refund and there’s no better time than the
present to collect any money that friends or family might owe you.
Cash
in any investments that don’t charge a penalty
If you have any stocks, bonds, mutual funds etc.
that can be sold now is the time. I would avoid selling any type of tax
deferred account (such as an IRA or 401(k) in order to avoid paying significant
penalties.
Speak
with your insurance agent
This option is often overlooked and is a great way
to raise some quick cash. Depending upon the type of life insurance policy that
you have it may be possible to either cash it in or make a loan against it. Being
without life insurance is a considerable risk but a quick call to your
insurance agent might just be the easiest way to get the down payment you need.
If you choose this course of action be sure to get quote on a replacement
policy to ensure that this is a viable option for you.
Talk
to the boss
Depending upon where you work it’s possible that
your employer may have a down payment assistance program that you aren’t even
aware of. That could be the solution you need and it’s a risk free option.
Obtain a “gift letter”
Many loans (but not all) allow the
buyer to pay for the down payment using a gift from immediate family members.
You will need a gift letter from the person that gave you the money and it must
state that it is in fact a gift and not a loan. This is a very common method
for those whom don’t have the cash required.
Check with your employer about stock
options
If stock
options are part of your benefit or compensation package at work you may have
the option of selling them for cash. This is yet another way to get quick cash
that many home buyers overlook.
Make a loan against your 401k
Many
employers allow workers to borrow against their 401k account. While the rules
may greatly from state to state and various employers as well, this can be a
viable solution to get the money needed for a down payment. There’s a lot to be
considered before utilizing this option including the fact that it can affect
your retirement process. Also, in most cases the balance is required to be paid
back immediately if you leave the employ of the company that holds the 401k.
Although this may not be the most attractive means to raise the cash you need
it is a possibility if all else fails.
Negotiations are a possibility
One way to help home buyers keep
more money for the down payment is to negotiate with the sellers. If they are
willing to agree to assist you with closing costs that just might be the
savings you need to come up with the up-front money. Obviously you will still
need some cash but if you can save enough on closing costs that might be the
break you need. It never hurts to ask and while you’re at it don’t hesitate to
ask your agent for any thoughts that he/she might have. Things change daily in
real estate and your agent just might know a way to help you.
The lender may be of assistance as
well
While this
is not a guarantee there have been times that the lender is willing to help in
situations where the buyer has difficulty on raising the required down payment.
One example would be if the lender is willing to discount their “origination
fee” and apply the difference towards the down payment. Another possibility
might be if the lender will charge a slightly higher interest rate for the loan
allowing you to pay the up-front costs as a part of your monthly mortgage
payment instead of needing the cash in advance. Every lender is different and
so is every situation so you will definitely need to ask your lender what
possibilities might exist.
These are
just some of the creative methods one might use when obtaining the necessary
down payment to buy a new home is an obstacle. It’s not unusual that many home
buyers that are qualified for a home loan have trouble coming up with the money
required in the beginning. There are many other methods that can help cash
challenged buyers and as I have said many times in the past your real estate
agent is truly your best friend in these types of situations.
Whichever
of these methods seems like the best for you it is mandatory that you check
with your lender to ensure that you are not breaking any of their rules. Be
diligent and keep a record of every transaction that you are involved in.;
verification is always required in the world of real estate and finally be
smart. Don’t accept offers for assistance that seem too good to be true until
you check with your agent.
One such
example is when a mortgage professional” suggests inflating the true price of
the house with the intent of using part of the price difference to put some
cash in your pocket (and maybe theirs). This is a form of mortgage fraud and it
is a crime. Such instances are very rare but always seek professional advice
before attempting anything that is a bit “out of the norm.
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