For much of the 20th and 21st century, home buyers struggled to get together a sufficient down payment. In the past, it was not uncommon for banks to require up to 50% down before providing a mortgage. Thankfully, times have changed. While the desired down payment is around 20% today, few buyers are able to get this amount together. Other loans are available for borrowers with fewer savings, including an FHA loan with a minimum of just 3.5% down.
Still, it is best to put as much down as you can comfortably afford, because it lowers the mortgage balance and the monthly payment for which you will be responsible. Here are some ways to get together a down payment to buy a home: in the Bay Area
Use Your Tax Refund
If you have trouble saving money, you can change your withholding exemptions to 0, which forces your employer to pay more money to the IRS and reduces your paycheck. This will also give you a large tax refund when tax reason rolls around. In some cases, even a regular tax refund can be enough to use as a down payment in the Bay Area.
Put Away a Certain Amount Each Month
The easiest way to grow your savings account in the Bay Area is setting up automatic monthly deposits. If you are paid bi-weekly and save $200 from every paycheck, you will end up with more than $5,200 before interest is added at the end of the year.
Borrow from Family
Many borrowers turn to their parents or family members to help them buy a home. Tax laws allow each parent to provide a certain amount as a gift with no tax consequences. If your parents will not give you the money you need, you may want to ask for an unsecured loan and pay it back later at a better rate than they could obtain from a bank or money market account in the Bay Area.
Sell Items You Do Not Need
Who doesn’t have a great deal of clutter and items they no longer need or use? Try cleaning out your garage, closets and the rest of your home in the Bay Area to gather items you do not need anymore. You can try selling through a garage sale, Craigslist or eBay to unload these items and put more money in your savings account.
Ask the Home Seller
If you are in a slow market, it is worth asking the seller to give you the down payment as a credit or pay your closing costs, especially if you are willing to pay asking price. Be sure to check with your lender first, as some have requirements about how much you are allowed to receive.
There are many programs that help borrowers with down payment assistance, particularly first-time buyers and veterans. You can also check if your city or county offers any programs to increase home ownership in certain areas in the Bay Area.
Get a New Job
Assuming you stay in the same field, changing jobs should have no effect on your ability to qualify for a mortgage. It may be a good time to start looking for a better-paying job in the Bay Area.
Use Retirement Funds
Many retirement accounts will let you borrow money to buy a home with no penalties owed. Make sure you understand any potential risks and fees you will have to pay before considering this option.
Think About 100% Financing
If you have sterling credit, you may be able to qualify for a 100% loan. There are a few ways to go about this, including VA loans and first-time home buyer programs. In some cases, you will receive a “silent” second mortgage that becomes due when you sell the home in the Bay Area.