24 Creative Ways to Come Up With a Down Payment
To successfully purchase a home today, you will need a minimum down payment of 5%(depends on your credit score) of the purchase price. Gone are the days of no down payment alternatives, down payment assistance and seller-offered programs to come up with the money needed to buy a home. Instead, let’s look ways some of my new homeowners have used over the years to secure a home.
1. Gift Money
Gift money is simply that — a gift from family or documented close relationship. The gifter needs to provide a gift letter and paper trail of the monies they are gifting for the benefit of the buyer. In other words, they’ll have to provide a bank account showing they had the ability to gift the money. In short, gift monies cannot be funds sitting at home in a safe.
2. 401(k)/Retirement Loan
Typically, borrowing for a down payment is not acceptable, but the exception is a 401(k) or equivalent retirement account (or current home equity line). If you can borrow money from your 401(k) for your down payment, this is accepted for obtaining a purchase mortgage loan.
Note: Depending on the terms of your loan, this could be counted as a liability and factored into your debt to income ratio.
3. Sale of a Good
Believe it or not, you can sell your a recreational vehicle(s) and use the net proceeds from the transaction as your down payment. Let’s say you decide to sell your motorcycle for $10,000. You’ll need to provide the full bill of sale — as well as the bank statement depositing those funds, matching the bill of sale — to your mortgage lender. Same goes for any other recreational vehicle, or other item that “makes sense.” The key is as long as it’s plausible and passes the litmus test and you can paper trail the monies from start to finish, you should have no problem using those monies for the house purchase. It is much easier to by a motorcycle/car/boat/trailer than a home.
Example: So many people call me and they have 3 vehicles and a motorcycle. Sell it. Purchase later IF your really need it.
4. Trust Funds, Settlement Awards, Etc.
If you come into a chunk of change via an inheritance, settlement, lottery winning, trust fund disbursement, family buyout, even a gambling victory, all of these monies can be used for the down payment as long as the sourcing of the monies is fully documented from A to Z with no stone left unturned. Matching of the amounts of monies used to the original deposits will be required when it comes time to secure the loan.
5. Line of Credit (A Home Suite Home does NOT recommend taking out ANY type of loan prior to securing a mortgage) BAD IDEA!!!
Where a down payment lacks, enter strength in income. You can take out a line of credit or a personal loan, deposit the full funds into your bank account and after two months, the funds will be eligible for use in the transaction.
6. Sell items just sitting in your garage, attic, baby items, outside equipment–
Don’t laugh! I did this when we moved a couple months ago. Items that are just sitting around. Sell on Craigslist, Ebay, yard sales, post to your Facebook friend etc. It is amazing how it all adds up. Sell some of the items in bulk. I call this upsizing your life. You don’t need all the clutter either. Examples: Harley Davidson Leather Jackets(no longer fit0- $75 , Elliptical- $50, Working refridge- $50, a spare tire from a motorcycle $60. Be creative. Price it to sell and these items add up very quickly. Bonus, you do not have to move them to your new home!!
7. Sell gold and/or silver
NOT your precious or special memory items but items that are just sitting in a box. You would be amazed how much this adds up for little pieces of something.
8. Borrow Against a Whole Life Insurance Policy
Little secret- Not only is a whole life insurance policy but you can actually take a loan against it. Yes, you will need to repay it back or it devalued the policy amount. Example: At one point in my life, we had to borrow against this to hold us over between jobs. The policy was meant to be a life insurance policy but it had a value.
9. Make Saving Competitive – FUN!!
Here is a fun twist. Whether is be your significant other or friend, talk about how much your going to save this week by- cutting back in things: coffee, cigs, drinking, combining your car trip or share w/ a friend. The ideas are endless. Amazing how much you save at the end of a week, month. It all adds up.
10. Second job
Even if it is part time or full time. Whatever your schedule permits.
11. Reduce Monthly Expenses
Go through your monthly bills. Cut back or stop services you really do not need. i.e.: Cable Services, re-negoitate your cell phone bill at the end of your contract. Do you really need a home phone & a cell phone? Do you really need multiple trips to Walmart- Go to the Dollar Tree or Dollar General (coupons accepted)- Usually cheaper. Car pool for your kids, shopping- plus you get to spend sometime with a friend or family member. Do not make any un-necessary purchases- Ask yourself: “Do I or my family REALLY NEED this item?”
12. Save Your Receipts
If you purchase something and do not use it or it does not work properly- take it back. No sense in paying for it or having it sit around
13. Have a Garage Sale
It does not have to be a big one. Put your items near the road on the weekend. Bring a book and relax for a couple hours. It just may be fun. Get the kids involved to sell their items too. “One man’s junk, is another man’s treasure.”
14. Eat the Food in Your Home
Use the food in your cupboards, freezer first for a week and deplete anything rather than going to the grocery store. I am guilty of this- we have food and never eat it. Such a waste of money. Try it a new recipe with the goods
15. Use the library
Instead of buying books, cd and magazines, borrow them from the library. Most libraries you can reserve them ahead of time, they will send you an email when the item is ready for pick up
16. Burn Your CD & Movies
Then sell the items! Keep the special ones.
17. Dining Out- cut it out
For about one or two weeks, do not eat fast food or any type of dining out. Especially if you are drinking. This is usually a huge expense to cut out monthly. Make a note how much you save if you just would have eaten at home.
18. Babysitting & Nannying
Yes, it is one of the oldest side-jobs in the book. If you like kids and/or would like another playmate, this is a perfect solution for helping out a working parents or date night out for one of your friends. Let your friends & family know what you are doing- trying to save money for a home. I think you will be pleasantly surprised w/ the support you will receive. Make a homemade flyer and pass out to people in your community. References help too.
Put your hobbies to use. Here is an example I use: I make sports bracelets for my favorite teams. Whenever I go out in public, sporting a few of my treasures. EVERY time, some one asks me about them. Almost every time, I sell one off my arm. I take a photo of it so I can replace my personal stash.
20. Tutoring and/or Elderly Companion
Some parent may need an outsider to help their child w/ reading, math, history etc. Whatever your area your good at, offer to help. Also, there may be a family in the area that needs someone to sit and chat/read to a relative- companion. Hourly rates range from $15-25. Make a flyer, tell your friends
21. Sells your Clothes
Have clothes you are no longer using- clean out your closets, kids. Sell in bulk. Sporting good sell like crazy too
22. Pet/House Sitting
If your love animals, this job is for you. My girlfriend needed extra money to move back toe California, so she told me she started pet sitting. Bonus, our dogs do not do not do well at a kennel. We had her for an entire year until she moved. She got to interact w/ pets since she could not have one and we had the ability to travel. After a year, she had many clients! Make a flyer
23. Yard Work
If you love to be outside and tinker in the yard, use your skills. Blow out leaves, pick up sticks/pine cones/dog waste/water plants/pressure washing home/driveway. Make a flyer or try Craigslist
24. Hunting & Fishing
Maybe sell some of your fish or deer meat to a friend of family. You can’t do it commercially without proper licensing.