You’ve finally landed that great job, and you’re ready to settle in to the area and buy a home. Your credit score is good, and you’ve been at your new job long enough to show a reliable income. All you need to do now is come up with a down payment.
The down payment for a mortgage is often the biggest hurdle facing new home buyers. While some mortgages can be secured with as little as five percent down, those low down payment mortgages aren’t usually the ‘deal’ they appear to be—adjustable interest rates can mean that your mortgage payment might go up substantially, and low down payment, fixed rate mortgages typically feature interest rates that are substantially higher than the base APR, or annual percentage rate.
In many metropolitan areas, the median price for a single-family home is around $250,000. To get the loan payments down to a manageable monthly expenditure, you may need to come up with as much as 30% for a down payment, about $75,000. Regardless of the actual percentage required, the larger the down payment you can afford to make, the better loan terms you will be able to secure.
In the following DEJB knowledge article, we will provide a brief look at some options for raising money for your mortgage down payment, including one method that is often overlooked but can make a big difference.
Set Up a Savings Plan for Your Down Payment on a House
Perhaps the simplest way to get money for a down payment on a house is to set up a savings plan. You’ll need to carefully analyze your personal budget and find ways to reduce your expenses—and if you don’t yet have a personal budget, setting one up is your first step toward finding money to save. Once your budget is established, set up an automatic transfer into a savings account specifically for home-buying funds. Scheduling this transfer close to payday will help eliminate the urge to spend it.
While saving in this way is a good first step toward funding a mortgage down payment, this process is a very slow one, and can take more time than most new home buyers are willing to invest.
Government Assistance for a Down Payment on a Home
The government wants you to buy a house. Though many of the federal down payment assistance programs were eliminated in 2008, some state and county programs are still viable. In California, for example, the California Homebuyers’ Downpayment Assistance Program gives qualified home buyers a deferred-payment loan for up to 3% of the purchase price.
Often there are grants available. Some new home buyers can earn as much as 140% of the median income and still qualify for a no-strings-attached grant of up to 5% of the purchase price of the home.
Other states offer delayed repayment loans that don’t need to be repaid until the borrower sells the home. On average, buyers using these programs can get from $5000 to $20,000 in assistance, depending on the program and the state where they live.
While there are many other state and local programs available, you’ll have to be willing to do the research, fill out all the paperwork, and be patient. Navigating the maze of federal, state, and county programs requires diligence and persistence.
Borrowing From Your Retirement for a Mortgage Down Payment
Check with your employer to see if your 401(k) plan allows for loans. If so, you may be able to borrow up to one half of your vested balance. You do need to be aware, however, that your employer sets the conditions of the loan, including the maximum term, minimum loan amount, interest rate, and applicable fees. You should also find out how leaving the company might affect your loan. The balance may come due immediately, and you may have to pay income tax and penalties on the outstanding balance.
If you have an IRA, you can withdraw up to $10,000, but again, you may have to pay income tax on your own money. Also, that $10,000 is a lifetime limit, and must be used within 120 days of receiving it.
Asking Friends & Family to Help Fund Your Mortgage Down Payment
Family will often help with a mortgage down payment. Gifts of up to $14,000 per year per person can be given without filing a gift tax return. You’ll need to get a letter from whoever gives you the gift, stating that the money is in fact a gift and that there is no expectation of repayment.
You can also borrow money from a friend or family member to fund your down payment. Of course, you’ll need to repay this loan in addition to your mortgage, and your lender will factor in this additional debt burden into its decision on whether to loan you the money for your home.
Using Jewelry Assets to Help Pay for Your Down Payment on a Home
Of all the ways you can raise money for a down payment, many people tend to forget how much money is in that jewelry box or safe deposit box in the form of unworn jewelry—a wedding or engagement ring from a previous marriage, or heirloom diamond jewelry or watches passed down from moms, aunts, or uncles. While holding onto heirloom jewelry for sentimental reasons is never discouraged, using the money that can be obtained from the sale of this jewelry in order to buy a home for your family is in most cases considered a better choice.
With a little help from a down payment lowering program and some personal savings, that daunting down payment for that new house might come down to a number you can manage with the sale of some old, almost forgotten jewelry.
Selling Luxury Assets to Get Money for a Down Payment on a House
There are many ways to sell your diamond jewelry and other portable luxury assets. Maybe your brother in law will buy that Rolex, or your cousin might be interested in your grandmother’s Tiffany diamond ring. But the reality will probably be that you’ll have to work at finding a buyer.
Many people find that selling their luxury assets to Diamond Estate Jewelry buyers is ultimately the easiest and most convenient option. We offer free appraisals, and you will receive a generous cash offer for your portable luxury asset. And because our international resale network of buyers of collectable estate jewelry and rare vintage timepieces, we are able to offer the highest prices for your items.
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