Saving for the Down Payment

While there are options for consumers who find themselves unable to come up with any funds for a down payment when taking out a mortgage loan, this is not an ideal situation. Having a down payment means you will likely be offered a lower interest rate, and of course your monthly payment will be lower as well. In addition, having a down payment in hand makes the mortgage loan approval process much easier, and proves to sellers that you are a reliable buyer who is serious about a purchase.

With this in mind, try these tips to help save or obtain funds for your down payment. Remind yourself and your family members that home ownership is a big dream, and making dreams come true requires work and sacrifice. Ask everyone to give up a small luxury (or a big one) such as dining out, cable television, excessive cell phone use, etc. Remember, a penny saved is a penny earned. Put the money saved towards your “Down Payment Fund”, and as you watch it grow you will become enthused and be motivated to save even more.

If you simply cannot save enough cash, you may want to look into taking money out of your Individual Retirement Account. While most of us are familiar with the tax penalty associated with early withdrawal, some consumers may not be aware that in most cases this penalty does not apply to funds withdrawn to purchase a home. Most IRA plans will provide a form you can fill out to request this special withdrawal, but be aware there is a limit, known as a penalty fee, to how much you can withdraw, and the exception usually only applies to first-time buyers. Ask your accountant or another tax professional for advice.