Eight Ways to Get a Home Down Payment For A Mortgage Loan

Saving for a home down payment is one of the biggest hurdles faced by first time home buyers. While the simplest way to save for a home down payment is to carefully put aside money each month from your income, most people do not want to wait years when there are such fantastic opportunities for home buyers in today's market that may disappear. Fortunately, there are many sources for home down payments overlooked by buyers.

How much do you need to purchase a home?

Before looking at mortgage down payment sources, home buyers need to understand how much money they will need to buy a home. In addition to a down payment, you will need money for closing costs. Home buyers can minimize the amount of cash needed at closing using a low down payment program such as the FHA mortgage program and also by having the seller pay closing costs using seller concessions. For first time home buyers, a low home down payment loan and seller concessions can often mean the difference between qualifying right now and having to wait for years.

If you are still scrambling for a home down payment, there are nine sources you may not have thought of that are permitted as down payment sources:

1. Gifts. A gift from a family member is always a great source since you do not have to pay it back. The FHA program allows 100% of the 3.5% down payment required to be a gift, while Fannie Mae and Freddie Mac require 5% down payments all from a borrower's own funds for their regular programs.
2. Home Buyer Tax Credit Advance. Some lenders are permitting borrowers to use the federal home buyer tax credit as their down payment up to $8,000 for qualified borrowers.
3. 401k Loans to yourself from yourself. Most 401k retirement accounts (not IRAs) have a provision where employees can borrow up to 50% of the value of the account for a down payment on a home. While a loan, you are repaying yourself.
4. Margin Loan against equities. Similar to 401k loans, home buyers can also access up to 50% of their marginable stocks for a down payment.
5. Whole Life Insurance loans. Many whole life insurance policies (not term policies) have provisions that permit loans against the policy which can be used as a down payment since these are also secured funds.
6. Sell an asset like a car or boat. If you make a bone fide sale of a car or boat to an unrelated third party and you can document the transaction with a bill of sale and canceled check, you can use proceeds from asset sales toward your down payment. However, underwriters are very leery of these types of transactions and they will be scrutinized.
7. Rent credit from your landlord. Only the rent you pay in excess of market rent can be credited toward your down payment, making it extremely difficult to use rent credits.
8. Community Pooled Accounts. While not very common, in some cultures it is common to pool funds so that members of the community can purchase homes sequentially. If this arrangement can be documented then these funds can be used.

What sources CANNOT be used for a home down payment?

The following are not permitted home down payment sources: Credit cards, personal loans, un-deposited and/or un-seasoned cash. Finally, the source of any funds that have been deposited into your account within the last two months must be documented.

For a free mortgage pre-approval and a review of your down payment options, please email us or call us at 1-877-868-2503.

To see the current mortgage rates, visit our Current Mortgage Rates page.

If you have any questions that you would like to get answered by our expert mortgage brokers, please email us or call us at 1-877-868-2503.

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