Down Payment for a Mortgage: Where Can I Get Money?
The down payment or the initial amount of money needed to finance a house with a mortgage is one of the biggest hurdles for many homebuyers. This can range from about 3% to 20% (or more) of the property’s sales price. The lender, for the most part, prefers buyers who can make a substantial down payment, as this lowers the amount of loan borrowed, which then minimizes the risk.
Mortgage lenders in Cookeville note that accumulating enough money for down payment can be a challenge. Here are some of the ways to help you deal with the payment hurdle:
Save more of your income.
By finding more opportunities to cut your spending or tighten the purse, you can add some more money to your down payment. This may mean cutting back on your morning lattes, packing lunch instead of eating out, or cutting out cable. Check this out for a few other ways to save.
Add extra income.
If you can, it is wise to get a second job to earn extra money. You can also ask your boss for a raise. If these options are not possible, you can ask other family members to pitch in until you reach a certain amount.
Use a gift.
The rules about using gift money as a down payment vary depending on the loan. The gift, furthermore, needs to be properly documented through a gift letter and financial statements. Lenders won’t accept if the gift is disguised as a loan or borrowed money.
Cash in some savings.
If you have a second vehicle, you may consider selling it. You may also want to dig through your closet, basement, or attic and look for valuable items that you can sell.
Consider loans with little down payment requirement.
Insured mortgages like Federal Housing Administration (FHA) and Veterans Administration (VA) require little to no down payment. You, however, have to be wary of private mortgage insurance, which can increase your monthly payment.
You have the final say on how much down payment you can comfortably put down, but it is advisable to put more. When thinking about an amount, don’t forget to consider other expenses like closing costs, insurance, moving costs, and furniture/appliances.