Down Payment Resources

Down Payment Resources

How to Gather Cash for a Down Payment

Fear about saving enough money for a home purchase holds back many buyers, but you may need less and have more ways of getting cash than you think. According to the National Association of Realtor’s Housing Opportunities and Market Experience (HOME) survey, more than 80 percent of prospective buyers think a down payment of more than ten percent is required. In reality, mortgage loans are available with down payment requirements as low as 3 to 3.5 percent and in some cases zero percent, such as VA loans.

Still, if you’re purchasing a home for $250,000, even a 3.5 percent down payment comes to $8,750. However, there are numerous ways you can come up with the cash you need. Some suggestions:

  1. Check out homeownership programs. Down payment assistance is available through state and local government programs to encourage homeownership. While many are limited by your income or capped at a maximum loan amount, you may be surprised to find that the limits can be high, especially in high-cost housing markets. Programs are available for people buying in neighborhoods where the local government wants to increase the number of homeowners and are available for people who work in certain fields such as teachers, health care workers or policemen. Check out to find a variety of programs that might help you.
  2. Start saving. The quickest way to build up savings is to set up an automated savings system that sweeps money from each paycheck into a separate account. Deposit any bonus or commission money, too. You can also sign up for savings programs that round-up your spending – Bank of America’s “Keep the Change” is one – although it can take a long time for significant sums to accumulate that way.
  3. Consider a second job or overtime. If you have the opportunity to work extra hours, sweep all of that money into your down payment fund. If your job doesn’t allow you to make extra money that way, consider things you can do in your free time to earn money such as walking dogs, babysitting, waitressing a couple of times a week – anything that brings in money that you can dedicate to your housing fund.
  4. Find a savings match program., an online savings platform, not only helps you accumulate your own savings, it also allows other people to match your savings. Friends and family members can contribute to your fund – think about asking for this in lieu of a birthday or holiday gift. In addition, the site has brand partners that contribute to your account. Check out state government savings programs, too. For instance, in Virginia you can save up to $50,000 towards a down payment and closing costs without paying taxes on the interest you earn as long as you declare that the funds are for a home purchase. You also register for cash for a down payment instead of a traditional wedding registry or baby shower registry.
  5. Ask your parents or grandparents for help. Your relatives can give you up to $14,000 per year without paying a gift tax, but you also need to follow the rules of the mortgage program by getting a letter from them stating that you don’t need to pay the money back. In addition, some programs require you to contribute some of your own money to the down payment. Your lender can help you find a loan program that meets your needs.
  6. Borrow from yourself. If you have a retirement account, check out the rules for borrowing from it for your down payment. Do be careful to understand the rules so you avoid a tax penalty and make sure you have a repayment plan.

Explore every possible avenue for down payment funds and you may be ready to buy faster than you think.