Down Payments - Get Creative
One of the biggest hurdles to buying a home is the down payment.
Saving up a chunk of change can be difficult, so getting
creative is a key.
Down Payments
The amount of your down payment is dependent upon many potential
issues, but two come to the forefront. Each of these can reduce
or increase the amount of cash you have to come up with for the
home of your dreams.
1. Credit Score - Generally, the better your score, the lower
the down payment.
2. Price - The selling price of the home is key because the down
payment is expressed as a percentage of the home price or
appraisal amount.
Either way, the down payment can amount to a serious chunk of
change. For many first time buyers, this is a huge hurdle to
overcome. They skimp and save everything they can, but saving up
many thousands of dollars can take time and be frustrating.
Fortunately, many first time buyers have already been saving up
for their down payments, but don't realize it.
Getting Creative
The Bank of You - The federal government looks very favorably on
home ownership. This means it makes every effort to promote the
real estate market through incentives and tax breaks. Once such
incentive is a unique little twist built into the laws
controlling 401k savings plans. The tweak in these laws allows
you to...well, borrow from the bank of you.
With most 401k plans, you have the right to borrow up to 50
percent of the vested amount of your account. If you've managed
to save $50,000 over the years in your 401k, you can take a loan
from the account for up to $25,000. This, of course, should be
used for the down payment on your home. After getting into the
home, you can simply pay off the 401k loan over five years or
you can take out a home equity loan and repay it with that
money.
In essence, you have used your 401k money to play a shell game
with the down payment. In the end, this creative down payment
funding strategy gets you over the down payment hurdle and into
your home.