Thursday, January 23, 2014

Trouble coming up with the down payment for your new home? Read this!



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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