The down payment is one of the most difficult parts of buying a home. It can be hard to save up a lot of money, so it helps to think outside the box.
Payments to start
The size of your down payment depends on a lot of things, but there are two that stand out. Each of these things can make or break how much money you need to buy the home of your dreams.
- Your credit score. In general, the lower your down payment will be, the better your credit score.
Price: The price of the home is important because the down payment is based on a percentage of the price of the home or the amount of the appraisal.
In either case, the down payment can be a big amount of money. This is a big problem for many people who are buying their first home. They save every penny they can, but putting away tens of thousands of dollars can take a long time and be frustrating. Many first-time buyers don't know it, but they have already been saving for their down payments.
Trying Something New
The Bank of You - The government likes it when people own their own homes. This means that it does everything it can to help the real estate market, such as by offering tax breaks and other incentives. One such incentive is a unique little twist built into the laws that control 401k savings plans. The change to these laws lets you, well, borrow from your own bank.
Most 401k plans let you borrow up to 50% of the money that has already been put into your account. If you have saved up $50,000 in your 401k over the years, you can borrow up to $25,000 from it. This should, of course, go toward a down payment on your house. After you move in, you can pay off the 401k loan over five years or get a home equity loan and use that money to pay it off.
In essence, you played a shell game with the down payment using the money from your 401(k). In the end, this creative way of getting the money for your down payment gets you over the hurdle of the down payment and into your own home.
