When lenders see you have a large downpayment sitting in your savings account, they can help you secure a lower interest rate and find you the best mortgage program for your situation. That money can also make your offer more attractive to sellers.
Even if you aren’t the best saver, there are plenty of options to stash away extra money without eating peanut butter and jelly sandwiches every night. You might have to make a few sacrifices along the way, but you don’t have to change your whole lifestyle.
Here are some tips on ways to find money and make extra money to get that perfect down payment:
Check your mortgage eligibility.
Set up a separate savings account for your downpayment
By having a separate account that you don’t touch, you can see the progress you have made month after month. Try automatically depositing a portion of your paycheck into the account.
Let your savings grow quicker
Once you have some money in your savings, you can turn that into even more money by investing it in high-yield savings accounts, certificates of deposit, mutual funds or other investments. Talk with your personal banker or financial advisor about what is best for you in the time frame you are thinking about buying a house.
Stow away windfalls
Anytime extra money comes your way, put it in that special savings account. It’s tough to see all that money from a birthday, wedding, a tax refund, yard sale, or work bonus to just sit in a savings account without splurging, but remember that your future goal of a house.
Cash in stocks or life insurance
Your parents might have bought you an insurance policy when you were born and it could be worth some cash. You can also liquidate stocks and bonds you might have, including savings bonds.
Get a part-time job or sell your talents
You play the guitar very well. Start giving classes on the weekend. You bake a fantastic chocolate cupcake. Sell those cupcakes at a farmer’s market.
There are plenty of ways to get creative with this, and any earned cash can go toward your eventual home.
Sell your stuff or put it on consignment
Those Precious Moments have been stored away in a box for a decade. Maybe it’s time to sell them on EBay or bring them to a consignment shop? Everyone has something they can sell that they don’t use anymore.
Check out your employer
Some companies, universities and organizations across the country want their employees to stay put and keep the communities around them thriving. So, they offer Employer Assisted Housing Programs.
For instance, Washington University in St. Louis offers up to $8,500 or 5 percent of the purchase price to qualified employees for downpayment or closing costs if buying a home in certain neighborhoods.
These are forgivable loans, which means they will be forgiven at the end of five years or 20 percent each year of ownership.
Budget your expenses on things you won’t miss
You don’t really need to go out to lunch every single day. By brown bagging at least two or three times a week, you could save around $30 to $40 a week. That all adds up by the end of the year. But you don’t need to cut out everything you enjoy – just things you won’t miss.
Withdraw from IRA
You can take out up to $10,000 from a traditional, SIMPLE or Roth IRA accounts without penalty to buy or build your first home, according to the Consumer Financial Protection Bureau (CFPB).
Usually, if you are under 59 ½ years old, you would pay a 10 percent tax penalty on early withdrawals. Consult your tax or financial advisor before making any moves that could have tax implications.
Get a VA or USDA loan
If you are a veteran or are currently serving in the military (or even a spouse), you can get a VA loan which doesn’t require any downpayment. A USDA loan also offers that same benefit, but you have to find a house in an area deemed eligible by the United States Department of Agriculture.
Seek out downpayment resources
Local non-profit and government organizations offer free money for down payments or closing costs to vitalize communities. Check out Down Payment Resource (DPR) to see if you are eligible for any downpayment or closing cost assistance.
You’ll need to know where you want to buy a house, the estimated price, your household income and some answers to other questions.
Research your particular profession for money
If you are in the field of education, law enforcement or military, or you are an EMT, a nurse or involved in one of many other careers, you could get some downpayment help. In fact, DPR says that more than 14 percent of homeownership programs are geared toward certain professions.
Ask for downpayment gift money from family
It isn’t uncommon for people to get some financial assistance from family. The CFPB says you must present your lender with a signed statement saying the money is a gift and not a third-party loan. Also, keep all the documents when you deposit the money in your account.
Just be patient with yourself, and you’ll be surprised how quickly that savings will grow.