Alternative sources for your down payment
Savings are not the only way to fund a down payment. In these difficult times, it is hard to keep up will bills much less save for a down payment faster than homes are going up!
If you make a good living, have good credit but do not have the savings to put down on a home, there are still a variety of sources available to you for your down payment.
1. Mom & Dad
Some banks allow gift money either seasoned ( which means in your bank account for at least 2 monthly statements or Without seasoning, some lenders will allow the gift with a letter statin g the money is a gift and is not a loan.
This cannot be a loan because then even though it is legal to borrow the down payment, it makes it difficult to qualify for the primary loan. The DTI (Debt to Income) Ratio limits you to what they will loan based on your Income and debt and then they will include the down payment INCOME and DEBT of the down payment. The DTI is usually 40% but can go as high as 48%.
2. Down Payment Assistance Programs
There are Interest free loans, grants (no payback), low down with No-PM. But you don’t have to be a low income to qualify…. For Example. in Orange County, California, a buyer could earn up to $98,000 and still qualify for a grant of up to five percent of the sale price of the home. These grants average from $5,000 to $10,000 and must be used toward the down payment of a single-family residence. You need at least a 640 FICO score, you must put any savings you have in as down payment, before they will help. Some cities have their own assistance programs.
3. Retirement Accounts
You can always borrow, Not take from, your 401K or your IRA for your down payment. You will get your down payment that you need and borrowing is OK and you are paying yourself back for your retirement days. However, there are some conditions. First, consumers should understand that they are not withdrawing the money. That would be a horrible mistake for many reasons, including the huge penalties and taxes you’d pay for early withdrawal. Always talk to your Tax advisor for the last word on how you would be affected.
The key is to weigh all the risks and rewards and making sure the move you make is right for you.
We work with lots of great lenders so contact us for all of your Real Estate Needs. Call or text at 949-400-3000 Email at MarleneDietrich@Realtor.com www.MarleneDietrichRealEstate.com
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