Our Real Estate Blog

Ideas For A Downpayment

December 18th, 2007 11:23 PM by Lehel Szucs

3 Places to Find Money for a Down Payment

Buyers who don’t have a 20 percent down payment are finding it harder and harder to buy a home. Here are some sources of money that are still available and the pluses and minuses of using them.

Borrowing from a 401(k). Only some companies allow this. The maximum available is $50,000 ($100,00 if both spouses have 401(k)s) and the loan must be repaid within five years. Failure to do so and the loan will be considered a withdrawal, leaving the borrower liable for penalties and federal income tax.

Withdrawing up to $10,000 from an IRA for a purchase of a first home. Spouses who both have IRAs can withdrawal a total of $20,000. A potential borrower who hasn’t owned a home in the past three years is considered a "first-time buyer" for this specific purpose and can make a withdrawal. Federal taxes must be paid on the withdrawal at the borrower’s current marginal tax rate.

A gift. If buyers are comfortable asking for money, their parents, friends, and relatives can give a gift toward the down payment. But for the lender to approve it, the giver must sign a gift letter stating that the money doesn’t need to be repaid.

Daily Real Estate News | December 10, 2007

Posted in:General
Posted by Lehel Szucs on December 18th, 2007 11:23 PM



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