To keep aside a stash of money for down payment seems like an easy thing to do. In actuality, it's not.
However, it cannot be denied that the first step towards purchasing a home is saving up for a down payment. It requires a lot of discipline, coupled with a strategic approach to be able to put aside a large sum of money.
Hopefully these options give you some creative ideas to save money for your down payment.
1) Low-down-payment mortgages
There are a number of low-down-payment options available, especially for first-time buyers.
- For instance, there are VA loans that have 0% down payment options available for the borrowers. VA loans are backed by the Department of Veterans Affairs and USDA loans.
- FHA loans offer down payments at a low rate of 3.5%. The FHA loans are backed by the Federal Housing Administration.
- Another is Conventional loans, which do not come with any backing from the government and offer down payments at a rate of 3% to borrowers with good credit.
2) Gifts and loans from family
While lenders accept down payment gifts (cash from a family member, for example), applying a gift for a down payment involves more than just depositing a check.
To put things in perspective, the donors will have to provide proof in writing that they not only made the gift but were financially capable of doing so. This means that they will be required to provide proof in the form of bank statements, as well as a letter confirming that the donation is indeed a gift and not at all a personal loan.
Online platforms can let you create a profile to raise and collect money for a down payment. However, some platforms might charge you a fee. Make sure to do your research on any fees or obligations if you decide the crowdfunding strategy is appealing to you.
In the end, choosing a down payment amount is just as important as deciding how you'll pay it. First, you must assess how much you can afford for a down payment. Second, sit with your lender and explore your loan options to understand how your downpayment amount will affect overall costs, rates, & timelines.