COMMON QUESTIONS
HOW CAN I COVER MY DOWN PAYMENT AND CLOSING COSTS IF I DON’ T HAVE CASH RESERVES?
Down payment and closing cost funds can come from several resources. First, of course, is your own savings or equity from the sale of your old home. For some buyers, especially firsttime buyers, that is a difficult task. That’ s why many lenders and government agencies allow purchasers to receive money from sources other than their own pocket.
CO-SIGNER A co-signer on a loan is a person who applies with you for a mortgage. It also means that person will take on risks associated with a loan, such as being held accountable for the payments if you default on the loan. In addition, this debt will appear on their credit report.
LOANS You can borrow from your 401( k) or Individual Retirement Account( IRA) for down payment money. While you will lose the investment dollars until they are paid back into the account, you are allowed to pull that money out without penalty and then repay it over time. Keep in mind that the loan is calculated in your debt / income ratios. Check with your financial advisor on any tax consequences before pulling your money out of retirement savings plans. Many lenders offer 100 % programs or gift assistance programs.
PERSONAL ASSETS Cash can be drawn from other investments and assets you may own. Stocks can be sold for cash, as can items such as a second car, boat, etc. If you want to hold onto those items but still need the equity out of them, you can approach your bank or credit union and apply for a loan secured by those items. Again, the monthly payment will be added into your debt / income ratios. It is advisable to consult with your lender before obtaining any additional loans.
SELLER Your buyer’ s agent can often negotiate seller contributions toward your closing costs, loan fees, or prepaid expenses. This is common in our market, with the purchase price adjusted accordingly— provided the home appraises at or above that price.
10 | THE BUYER’ S EDGE | A GUIDE TO PURCHASING A HOME