Buying a house is a serious financial commitment which, for most, takes a great deal of planning and saving. You may have already learned how a down payment on a home can lower your monthly payments and help you avoid private mortgage insurance, or PMI. But if you don’t have enough money for a down payment, did you know that you can actually borrow it? Read on for more information about how you can borrow money for a down payment on a home.
If you don’t have a great deal of pre-existing debt, you may be able to borrow money from a lender for a down payment. You may be asked how much you owe and if you owe a substantial amount, it can significantly decrease how much you will be allowed to borrow. But if you have little or no debt, you might be in the market for a loan to help you make that down payment.
If you’ve been saving money in an IRA or 401k plan, you might also be allowed to borrow from yourself. If you are relatively young, this might be a good option because you will have plenty of time throughout the rest of your career to rebuild your retirement savings. Remember, not all IRAs and 401k plans are the same, so you should see what the rules are and if there are any fees or penalties for early withdrawal. Also remember that you’ll be losing out on growing your retirement savings, which is important.
You may also be able to borrow money for a down payment from a family member. These family loans can be a great way to make a down payment on a house. If you borrow from a parent or relative, it can be a good idea to have a contract drawn up by a lawyer that states the terms and dates of payments, as well as interest rates on the loan. This can also serve as proper documentation for tax purposes, which can make the interest on the loan tax deductible.