Buying a house is a an exciting milestone many people look forward to. Not only does a homeowner have the freedom to personalize their space according to their own tastes and lifestyle, but the mortgage payments do double duty – provides shelter while building additional wealth through loan reduction and price appreciation!
If you pay rent for 15 years, you’ll still be looking for a place to live if you need to move due to circumstances beyond your control. If you pay a mortgage for 15 years, not only have you paid for housing but you’ve also paid down (or in some cases, paid off) a loan giving you forced savings in the accrued equity, and more wealth through the increase in value.
For many people earning a good income that supports a mortgage payment, the down payment can stand between being a renter or becoming a homeowner.
The good news is that your down payment doesn’t have to be much at all, and might be found in one of the following 3 ways:
Gift from family – Parents, Grandparents, Aunts and Uncles, Brothers and Sisters or other family members can gift you money for a down payment. As little as 3% down and a decent credit score can qualify you to buy a home. For a $450,000 home, that’s $13,500 which is well under the gift exclusion rules for 2019.
Borrow from Retirement Account(s) – tapping retirement accounts for down payment money can be a good source of help. Often a loan taken from retirement accounts with the specific purpose of purchasing a home carries a 10 year repayment period – and you are paying yourself back. This strategy should be carefully considered – if you take a loan from an employer sponsored retirement account such as a 401k, there can be repayment conditions that kick in if you decide to switch jobs. Click here for an article that talks about how to take control of your own 401k funds. Before tapping into a retirement account, consult your own professional financial adviser or CPA for advice and guidance on whether or not this is a good move for you and your finances.
Down Payment Assistance – the State of California’s CalHFA Agency offers first time homebuyers several programs to obtain help with down payment money. Down payment help includes simple interest “silent second” loans that do not require a monthly payment and grants that do not require any form of repayment. To utilize this type of down payment help, contact me for more information.