Thinking of buying a home in the near future? Now’s the time to start setting aside money for a down payment. If you’re not sure how much to save, use our home payment calculators to figure out how much of a mortgage you can afford, then plan on having around 20 percent of that figure for a down payment.
Once you know how much you need, use these ideas to figure out where to get the money from:
- Build up your savings account: This is a low-risk source of money for a down payment. Use an account that earns interest and has no penalties for withdrawing money. Set aside a certain amount of money from each paycheck to build up this account over time.
- Sell taxable investments: These include bonds, stocks and mutual funds that you won’t be penalized for selling as you would with tax-deferred investments, like a 401(k).
- Ask for a monetary gift: If an immediate family member is willing to give you the money for a down payment, check with your lender to see if that’s allowed. If so, get a gift letter from the family member, and gather copies of the check from them.
- Use state or local loans or grants: Check with HUD’s listings to see what’s available, and keep in mind that you’ll probably need to apply for a government-insured FHA to qualify.
- Use part of your IRA: If you’re a first-time buyer, you can take up to $10,000 from an IRA for a down payment. Just make sure you talk with an accountant first and declare the income on your tax return.
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