Millenials have come to the age where at least some of them are starting to consider buying a home. However, according to Tobie Stanger of Consumer Reports, and their recently given survey, several members of the age group said they can’t afford a down payment. Yet, there are several things they don’t realize.
Some mortgage companies offer mortgages for a three percent down payment. That looks good until you realize that any down payment that is less than 20 percent of the home equity could require mortgage insurance of up to one percent of the loan’s value and larger monthly payments. However, there are many things that can help you get a better loan:
- There are several programs that will help you acquire a no-interest loan. Grants are also available. While different programs have their own requirements, there are many options out there.
- We all know of the ability to pay bills automatically. You can allow companies to automatically deduct money from your checking account. This option is available for utility, cable and insurance bills. However, you can also do this for down payments.
- While asking family for money can often be a stressful situation, it doesn’t need to be. A parent or loved one is able to give up to $14,000 to any individual and not face a federal gift tax. Your elders can also take $10,000 out of their IRA to fund qualified costs regarding a first-time home buyer.
- You can also use crowdfunding sites. The popular site known as GoFundme is used to raise money for different reasons. Some people use it to raise funds for medical reasons, weddings and several other opportunities. However, it can also be used to help raise funds for your down payment. All it takes is a brief description of your situation and a picture, which really is “worth 1,000 words.”
- Withdraw from a Roth IRA. As with financial gifts as stated earlier, you can also withdraw funds from a Roth or traditional IRA without a penalty as long as you are a qualified first-time homebuyer. Withdrawals of up to $10,000 from a Roth IRA are not subject to penalty.
- According to the IRS, certain 401(k) plans allow you to borrow a certain amount of funds, and home buyers can take up to 30 years to do so. Another plus is that it doesn’t count towards your debt-to-income ratio. However, there is a high risk involved – you may have to pay regular tax dollars on what you gave and borrowed. Check with your 401(k) to find out your guidelines.
The Powell Group is here to help with all your home-buying needs. We realize it may be a scary experience, but we can assist with any question you may have.
(Picture used from flicker.com)