There are a variety of sources
that you may draw upon for your down payment. Some of the
most common options are:
Personal Savings- (including IRA's & 401(K)'s)
Proceeds from the sale of an asset - such
as stocks, bonds, and real estate.
Gift funds from a relative –This is
a gift of cash from a relative by blood or by marriage. Some
lenders may require a “gift letter” that outlines
the amount and terms, which needs to be in writing, and signed
by all parties. Statistically, over 20% of first time homebuyers
get help from their relatives to make a down payment.
Zero down payment or 100% financing - either
a 1st mortgage exclusively or a combination of a 1st and 2nd
mortgage.
Piggy Back Loans – this is what is
known in the industry as an “80-10-10” loan (an
80% 1st mortgage, 10% 2nd mortgage & a 10% borrower down
payment). Also available is an “80-15-5” loan
(requiring an 80% 1st mortgage, 15% 2nd mortgage & a 5%
borrower down payment).
Borrow your down payment utilizing assets that you already
own- For example borrow against your 401(K) - if your company
plan allows it or borrow against your fully invested stock
portfolio (avoiding a taxable sale and keeping your portfolio
fully invested). You may also obtain a bridge loan against
your yet unsold primary residence in order to purchase a new
one.
Government Programs-There are a number of
state and federal programs designed to help you make a down
payment. Each program has different criteria for eligibility.
Some of these programs include:
- FHA Loans – You can put as little as 3% down
- VA Loans – If you are a veteran, you may not have
to make a down payment at all.
- CAL-Vet – If you are a veteran who is currently
residing in California, you may be eligible for this program.
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