By Autumn Knall – Evergreen Loan Officer
A down payment is one of the most common hurdles to homeownership. Even if you have been diligently saving with each paycheck, rising home values coupled with other closing costs, can make it challenging to come up with the necessary funds. Luckily, there are a number of options that can help. If a down payment stands in the way of making your dreams of home ownership a reality, consider the following strategies to get the funds you need:
Investigate Housing Grants
Many local housing and government agencies offer grants to help subsidize the cost of home ownership. In many instances, grants come with eligibility requirements. Assuming the funds are used for the purpose specified, they likely don’t need to be paid back. Check out a list of available housing grants here.
Explore Down Payment Assistance Programs
An example of a down payment assistance program is Michigan State Housing Development Authority. MSHDA gives first-time home buyers access to funds from $7,500 to $10,000 depending on the zip code. These funds can be used for down payment or closing cost if there is anything left after the down payment is covered. The borrower is still required to make a small investment. For details, you can speak with a certified MSHDA representative at Michigan First Mortgage.
Sell Existing Assets
An asset can be anything from a home, vehicle, painting, jewelry, or any other item that carries monetary value. To use the sale of an asset as a source of funds, you must first prove you own it. After proving that you own the asset, the sale must be documented with a bill of sale signed by all parties involved in the transaction. From there, the funds from your assets need to be deposited in your checking or savings account and match the date and amount of the initial sale.
Withdraw or Borrow Funds from Retirement Accounts
You can withdraw or borrow funds from your retirement fund to purchase a home; however, both options can affect you financially. The loan can affect your Debt-to-Income Ratio (DTI) and the withdrawal can impact your earned income. Be sure to speak with a financial advisor or tax expert to ensure that taking money from your retirement account is an attainable and safe option for your finances.
Home Equity Loan or Line of Credit
If you have an existing home, a Home Equity Loan or Line of Credit may be a great option to free up cash for a down payment. Home equity loans allow you to use the equity in your current home as collateral to borrow money. Learn more about Home Equity options by talking to a Loan Officer at Michigan First.
While many options exist that can help, the following cannot be used to fund a down payment:
- You cannot use borrowed funds (except for a loan against your retirement, HELOC, or 0% interest loan provided by a government agency).
- Funds that can’t be sourced
- Funds from people or entities that aren’t specifically mentioned under the gift category
Interested in learning more? Our team of Mortgage Loan Officers can help. Visit MichiganFirstMortgage.com to start the conversation.