Saving up for a Down Payment

Adding to Downpayment Savings Saving up for a mortgage down payment can take quite a bit of time and planning. You may be wondering if there are any ways you can help add to these savings beyond following your budgeting plan.

You should speak with your mortgage lender or a financial advisor to see what actions make the most sense for your personal situation.

Here are a few ways you should consider to increase the amount of money for a down-payment:

1. Look Into Special Down-payment Programs

An expert on buyer assistance programs recently told Realtor.com that over 68 million single-family homes and condos throughout the US might be qualifying properties for at least one down payment program. Every county in the country has some sort of program for down payment assistance. Research programs in your area to see what is available.

2. Tapping Into Your IRA

In most cases, current tax laws allows a potential home buyer to withdraw up to $10,000 out of an IRA to use for a down payment for a first home. If you are married and are both first time buyers, you can withdraw up to $20,000. The IRS definition of a "first time buyer" is very generous for these purposes, as well. To qualify, you do not necessarily have to be purchasing your first house. You merely have to have not owned a principle residence during the two year period before buying.

If you do withdraw money from an IRA, you may not have to pay a withdrawal penalty, but you will still have to pay taxes on the money that you take out. However, the reduced expense over the life of your mortgage can sometimes be worth it, depending on your circumstances.

3. Borrowing From a 401(k)

If you have a 401(k) retirement account through your employment, you might be able to borrow against your 401(k). This is a strategy that takes careful consideration, as there are some downsides.

You will have to pay back any money that is taken out of your plan in most cases. And, replacing the money will likely cost more than the loan, as it will be paid back with after-tax dollars. However, this sort of loan can sometimes be beneficial since you will be paying yourself back and likely saving money on your mortgage due to the higher down payment.

4. Receiving Gifts

Parents or close relatives can often give a potential homebuyer a gift of cash to use as a down-payment on a home. Any gifts for down-payments, however, must always be gifts and not loans. If it is a loan, draw up a repayment plan with clear terms regarding how soon it needs to be paid back and whether any interest will be owed. It is important to understand the guidelines before using this method to assist with your home purchase. Also note that a loan will be considered a debt for calculating mortgage payments and your mortgage budget.

5. Moonlighting and Extra Employment

Just about everyone has a skill that can be parlayed into a temporary part time job. This can involve spending a few nights a week behind a cash register at a local store. You can also use any skills you have, such as tax preparation, copywriting, crafting or others, freelancing for extra cash. If you manage to earn an extra $100 or more a week that you immediately put in savings for a down payment on a home, that can be a significant amount by the end of one year.

6. Finding Lost Money

Every state has a registry of lost or abandoned funds. These can include investment accounts, utility deposits, forgotten paychecks and more. Check the registry for every state where you have ever lived. If some money is found, it is usually simple to fill out the form and send away for your missing cash.

You should also take a look at old savings bonds that you may have forgotten you have. Around $14.5 billion worth of bonds are currently unclaimed and no longer earning interest. Find any that may belong to you to increase the money you have on hand when it comes time to apply for a mortgage.

7. Selling Unwanted Items

Are you ever going to use that expensive elliptical machine, or watch those Blu-rays again? Nearly everyone has valuable objects that they no longer use. No matter whether it's a piece of jewelry that no longer fits your style or a gaming console that is gathering dust, there may someone else who will want it more than you do. Go through items and check sites like eBay and Amazon to see what they are currently worth. You can choose to sell at either of those large outlets or through local options like craigslist and Facebook selling groups. 

8. Doing Some Microtasks

Whether it is answering surveys, transcribing short bits of audio or finding contact information, there are people willing to pay for your effort. Mechanical Turk is a site run by Amazon where people can sign up to do small tasks for small amounts of money. You can also look at sites like Swagbucks, Pinecone Research and MyPoints to get small amounts of cash for sharing opinions or watching or reading advertisements. While you will not get rich at this, adding a few dollars' worth of tasks to your daily routine can add a few hundred to your kitty for a down payment for a home. 

These are just a few of the activities that can get you a little closer to your dream of homeownership. While most do not provide a fortune, small but consistent gains can add up to something big. Look around for extra cash wherever you can to build a healthy down payment. The more you save now, the more likely you are to be approved for a loan that helps you find the right home.

Dylan Snyder is a seasoned real estate professional serving the Jupiter real estate market, Palm Beach real estate market, Palm Beach Gardens real estate market, North Palm Beach real estate market, and the surrouding Palm Beach County area. Along with being a top producer in Jupiter real estate, Dylan's professionalism and expertise in luxury and waterfront real estate sets him and his team of real estate experts apart from the competition. For more information on Jupiter and Palm Beach real estate for sale, contact Dylan at (561) 951-9301.

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