With the best and least expensive loan programs requiring a minimum of 20% down payment, it’s clear the biggest obstacle to buying a home in Austin today is accumulating the money for the down payment and the closing costs.
Very Few No Down Payment Loans Available in Austin
There are very few “no down payment” loans available and the likelihood is there’re not coming back soon. The mortgage meltdown has brought sanity back to the financial community and with that a glut of un-saleable, over-priced homes. Affordable financing is the life blood of the real estate. You can’t sell it unless you can finance it.
Down Payment + Closing Costs Can Add Up
Clearly home prices are high even after the erosion of value in virtually every marketplace. So, coming up with 20% of the purchase price plus costs and fees associated with the purchase (aka closing costs) is for many a major road block. Closing costs alone can range from 1% to 4% of the purchase price depending on your Realtor’s negotiation skills.
Think Outside the Box for Down Payment Short Cuts
Historically, most people saved until they had the necessary down payment. It took discipline and perseverance and time to gather enough money to buy a piece of the American Dream. Thinking out of the box may provide a short cut for some seeking to more quickly over-come the down payment hurdle.
5 Ways to Come up With Down Payment Without Saving
One or more of the following options may help you gather the money that’s been holding you back and advance the home buying process.
Alternative #1: Withdraw from Your Retirement Accounts
If you have a 401K or Roth IRA account and retirement is not in your near future, you may be allowed to tap into or borrow against your own funds for your down payment, but if you are planning on retiring soon you can still withdraw what you need.
If you own a Traditional IRA, currently you can take up to $10,000 with no penalty to used toward the purchase of your first home, but you will be taxed. You may withdraw as much as you want from a Roth IRA with no penalty or taxes. Ask your tax advisor about the details.
Alternative #2: State, County or City Down Payment Assistance Programs
Investigate any state, county or city programs that may be available. These programs vary in scope and availability often with specific target audiences, such as, low and moderate incomes. Others seek to alleviate the glut of foreclosures or abandoned homes and some don’t have to be repaid. Most programs have an educational component where applicants attend a personal finance or homeownership preparedness class. Log on to your state, county and city websites to find out about programs that may be available to help you.
Alternative #3: Gift Money from Relatives
Inquire whether a closely related relative (Parents, Grandparents, Siblings) might make you a gift…not a loan. The lender will require a letter from the gift giver to verify that the money is indeed a gift and repayment is not expected. Before you accept a gift, check with your loan officer or mortgage broker to understand the rules and the documentation required.
Alternative #4: Employee Assistance Programs
Check into any employee assistance programs that your company may offer as part of a human resources benefit package. Government employees often have grant programs available to them, and private employers. Many colleges and universities, major corporations and banks and lending institutions offer down payment help and have below-market-rate mortgages set up for faculty members and staffers. Check with your Human Resources department to determine whether any such program is available to you.
Alternative #5: Register for FHA Bridal Registry Account
Register for the FHA Bridal Registry Program . Don’t stop reading — you don’t have to be prenuptial to qualify. This program works just like a traditional registry. Hope-to-be home buyers, and really anyone who would like to collect gifts for things like graduation or a new baby can apply the gifts toward their down payment. Register with your FHA mortgage broker or loan officer to get started. Few people know about this program and we think it’s really terrific. What better gift to receive than a portion of your down payment.
Think You Might Be Ready to Buy a Home in Austin?
If you think now may be the time for you to buy a home in Austin, call us at (512) 827-8323. We’ve worked with many buyers over the years and can help you determine whether or not now is the right time. Even if you are just in the investigation stage, we’d be happy to talk to you and help you work out the process. For more info about who we are and how we work, check out our Austin Home Buyer page.