Down Payment Solutions. Be Creative.

We all know that it takes 3.5% of the purchase price of a home to make a down payment.

So, how can you solve that financial goal when looking to buy a home? Sometimes you just need to be creative.


Accept gift money. While not all of us have this luxury, it can sometimes be a saving grace to coming up with part (or all) of what you need to secure that down payment. Gift money is deemed as a gift from a family member or documented close relationship. That being said, the person who gives this financial gift must provide a gift letter and bank account paper trail of the monies being given to the you, the home buyer.

Line of credit. You can take out a line of credit or personal loan and deposit that loan (in its entirety) into your bank account. The caveat…you must wait at least two months for the funds to be eligible for the home buying transaction.

Inheritance or winnings. If you’re sitting on a large chunk of money due to a trust fund, inheritance, lottery winnings (don’t we all wish) or such, you can use these funds toward your down payment so long as the documentation is provided in full for how those monies were yours from the get-go.

Gas hog no more. Hey, be creative. If you’re holding onto a pricey recreational vehicle that you don’t really need, sell it. You can use the net proceeds as long as you have the full bill of sale, bank statement showing those funds were deposited, to provide to your mortgage lender.

401(k) or retirement loan. Usually borrowed funds for a down payment is not an option, but the exception is a 401(k) or equivalent retirement account (or current home equity line). You can actually borrow money from your 401(k) to get yourself a mortgage loan. Just keep in mind that this could be considered to be a liability and factored into your debt to income ratio.

You may be good to go with your down payment, but for many of us, these creative solutions can help when crunched for budgeting that 3.5%. Keep in mind that closing costs also average 3% of the purchase price, so that’s an additional expense you’ll need to have in your bank. Literally.

As always, look to me for advice on this and together with your mortgage lender, we will find solutions to getting you into that new home. Contact me to discuss your home buying needs!


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