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Luke Mullins
Although cheaper prices and record-low mortgage rates have made home buying increasingly attractive, tight lending standards continue to keep consumers on the sidelines. And while a beefed-up FICO score and documentation requirements may have slowed the process, it's the pile of cash needed to secure financing that prevents many would-be buyers from becoming homeowners, says Susan Dewey, executive director of the
1. VA, USDA:
Veterans, active duty personnel, as well as some members of the
2. State programs:
Consumers can also get down-payment assistance through their local state housing finance agency. Although offerings vary by state, such agencies can help first-time buyers by providing grants, subsidized home loans, and other programs, says Dewey, who also serves as the president of the
3. FHA:
Borrowers who aren't eligible for such zero-down-payment mortgage programs can still obtain low-down-payment home loans through the
4. Gifting cash:
If you don't have enough down payment cash on hand, a good first step is to see if anyone close to you does, says Keith Gumbinger of HSH.com. "Do you have anybody who can give you money -- your parents, a rich uncle, or your grandparents?" Gumbinger says. Gifts from parents or other family members have long been a source of down payment cash for young couples or first-time buyers. "Those gifts have to actually be documented as gifts," Gumbinger says. "You must get something [in writing] from each of those donors that says there is no obligation to pay back the money." Be aware, however, that cash gifts from a single source that exceed
5. Tap your IRA:
Certain home buyers can use funds from their IRA to cover down-payment costs without incurring the 10 percent early withdrawal penalty. Individuals who are under age 59½ and have not owned a home within the preceding two years can withdraw up to
6. Use your 401(k):
Although would-be home buyers may be able to access cash from their 401(k) for a down payment on a principal residence, they must first demonstrate a severe financial hardship. Many financial advisers advise against withdrawing funds from your 401(k) unless you have exhausted all other options. (That's your retirement nest egg, after all.) In addition, some 401(k) plans allow participants to borrow a portion of the funds they've saved up to cover a down payment or other expenses. Plans that permit such loans typically provide access to as much as half of the vested account balance, not to exceed
7. Savings plan:
Although it might take a little time and discipline, an old-fashioned savings plan can be a great way for consumers to put together enough cash for a down payment. For assistance in creating a savings plan, consider reaching out to a certified credit counselor, says Gail Cunningham, a spokeswoman for the
8. Selling assets:
Some of your down payment cash could be sitting right in front of you, Gumbinger says. "You may consider looking through all of the stuff that you have accumulated and see if there are things that you might be able to sell that you don't need," Gumbinger says. "If you have got three flat screen TVs in your apartment because they were cheap and you just started accumulating them, see if you can't get rid of some of those assets and see if they can be turned into something that's going to be more productive for you." Once you've assembled an inventory of items you would be willing to sell, consider holding a garage sale or putting them on
9. Second job:
Additional income, of course, can also help would-be home buyers save enough cash for a down payment. But with the national unemployment rate at 9.5 percent, such work may be difficult to find. Still, it's worth seeing if there is any freelance work you might be able to take on, or checking with your friends who work in retail to see about any part-time openings.