Saving up for your mortgage down payment is never easy. On one hand, you can’t afford not to put down any money because most lenders would quickly deny your application without it. On another, even if you could qualify for a no money down mortgage, it’s still in your best interest to choose a loan with a down payment to avoid sinking underwater down the road.
Though it’s only a matter of time before you can save an adequate amount, you might be counting several months or even more than a year, to get that strict San Francisco, Miami or Salt Lake City mortgage with 80% LTV.
Fortunately, industry expert Altius Mortgage Group says there are many ways to cut the wait. Apart from relying solely on your income, the following can help you produce the down payment you need faster:
Reaching Out to Your Loved Ones
More often than not, your family would be more than willing to help you with your home purchase by way of gifts. But it must come from close family members only. Many lenders consider gifts from friends and distant relatives sketchy, as they avoid letting borrowers use funds coming from secret loans for down payments.
In addition, lenders wouldn’t accept an entire down payment coming from a gift. Above anything else, the amount you put down is a testament to your capacity to maintain a loan. If you can’t prove you produce a certain amount of your down payment, then it means you’re not ready for a major debt like a mortgage.
Loan from Friends
Because you can’t accept monetary gifts from anyone aside from close members of your family, you can instead borrow money from a distant family member or a friend. As it’s required to be paid back, your lender could allow you to use it for your down payment; however, it could increase your debt-to-income ratio.
Use Your Retirement Money
If this is your first home purchase, you can tap into your individual retirement account for up to $10,000. This withdraw, however, may require you to pay some income tax. Also, 10 grand is usually the lifetime limit you can withdraw from your IRA.
Hope is never lost if you struggle to save for your mortgage down payment. The best way, however, is to patiently set aside money from your income and never rush into your home purchase to avoid costly consequences if you’re realistically not yet financially ready.