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7 Ways to Get the Down Payment for a House

One of the biggest challenges aspiring homeowners face is figuring out how to get a down payment for a house. A down payment can be a major expense, often running tens of thousands of dollars.

However, while it is a daunting task, it is a doable one. If you’re trying to work out how to get money for a down payment on a house, here’s what you need to know.

How Much Money Do You Need for a Down Payment on a House?

Cash for down payment on a house

Many aspiring buyers wonder, “Can I buy a house with no money down? If not, how much cash will it take to cover the down payment?” As a result, before we discuss how to get a down payment for a house, it’s important to talk about how much you’ll need for a down payment.

Technically, it is possible to buy a house with no money down. However, that option is only available if you qualify for certain programs.

Both VA and USDA loans may not require down payments. However, those mortgage programs are pretty strict, and not all buyers or properties are eligible. If you can secure one of these loans, you’ll need to adhere to various stringent requirements to complete a home purchase.

Outside of those programs, most mortgages require some form of down payment. Typically, they run from 3 to 20 percent of the property’s sale price, depending on the type of loan involved. The appraised value of the home can play a role in determining the down payment requirement as well, though that isn’t always the case. Additionally, the borrower’s credit score can be a factor.

If you want to estimate how much you’ll need for a down payment, you need to research mortgage options. Some programs are relatively standardized, while others may vary by lender. As a result, it’s wise to do a bit of digging to determine which kind of mortgage you’re eligible for and is your best fit.

How to Get a Down Payment for a House

If you’re looking for ways to get a down payment for a house, there are a surprising number of options. Some are designed to cover the cost in full in one go. Others may work best when used together.

By understanding the various opportunities, you can figure out how to get money for a down payment with greater ease. Here’s a look at some of the most common approaches.

Research Government Programs

There are many government programs designed to make homeownership more attainable. In some cases, these come in the form of government down payment assistance.

While there are some federal down payment assistance options, most programs are operated or administered at the state level, typically through a housing authority or similar agency. For example, first-time home buyers in NY may be able to turn to the State of NY Mortgage Agency (SONYMA) for down payment assistance, as well as other kinds of help.

Programs like these may be able to provide you with a loan for a down payment on a house, some of which may be forgivable. Others may provide down payment grants.

Often, the requirements for government down payment assistance programs are a bit strict. However, if you could qualify, they are worth exploring.

Down payment assistance from government programs

Ask Your Parents for Help

When it comes to down payments, there are rules about where the money can come from, especially if you haven’t had it stashed for long. However, if your parents offer the cash as a gift, many of the restrictions don’t apply. Additionally, if each parent provides $15,000 or less (based on 2021 limits), the gift could be tax-free.

If you go this route, you do need to prove that the money is a gift, not a loan for a down payment on a house. Loans are treated differently, so keep that in mind before asking a parent for this kind of down payment assistance.

Stash Your Tax Refund

Many people end up with a sizeable tax refund when they file. If you usually do, you could set yours aside, allowing you to gather or start saving for a down payment faster.

However, even if you don’t usually get a big refund, this approach could still work. You could alter your withholdings, allowing more money to be set aside for taxes from every check. Then, when you file, you’d get the excess money back.

The biggest drawback of the latter option is that you won’t earn interest on the money you’re stashing. As a result, it may be better to schedule an automatic transfer into a savings account instead of altering your tax withholdings.

Ask the Seller for Help

In some cases, you may be able to ask the seller for a credit at closing that can cover your down payment. Often, this means agreeing to a higher sale price, ensuring that the cost of the down payment doesn’t harm the seller’s ability to get a fair profit.

It’s important to note that this option isn’t universally available. Some mortgages dramatically limit seller credits, so not all borrowers can go this route.

Find a 100 Percent Financing Option

Aside from VA and USDA loans, there can be some 100 percent financing options available. With these, you essentially get a loan for a down payment on a house.

You’ll either end up wrapping the cost into your primary mortgage or by using a second mortgage (or other kinds of financing) to cover the difference. This approach isn’t always viable, but it may be worth exploring.

Tap Your Retirement Fund

You could tab your retirement find to finance your down payment

Depending on the type of account you have, you might be able to borrow from your retirement to get a down payment for a house together. Some accounts may even let you tap the cash without paying a penalty, though that isn’t always the case.

It’s vital to understand that using this approach does have a significant impact on the account’s long-term value. Additionally, if your retirement account uses a loan for a down payment on a house approach, not a withdrawal, failing to repay could come with notable consequences.

Before you go this route, research the rules surrounding your retirement account carefully. That way, you can make sure this is actually the right choice for you.

Save on Your Own

If you’re trying to figure out how to get money for a down payment on a house, you always have the option to save up yourself. You could start allocating a certain amount of cash in your budget, putting it into a savings account on a set schedule, and building up a down payment over time.

Getting a second job or launching a side hustle to fund a down payment can work, as well as selling items you don’t need to generate some extra income. You could also ask your current employer for a raise or send all bonuses and cash gifts from holidays to your down payment fund.


 

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