How to Raise Money for a Down Payment

Finding money for a down payment is possible.

To purchase big ticket items, such as homes, cars and boats most banks will require the lender to secure a sizable down payment. The larger the down payment, the less the home or car owner will be required to pay out-of-pocket each month. A larger down payment can also help a prospective buyer secure a lower interest rate, which also saves money in the long run. According to a National Association of Realtors 2009 telephone survey, eight in 10 Americans feel having enough money for the the down payment and closing costs is the biggest barrier to purchasing a home.

Instructions

1. Borrow money from a life insurance policy. This is only possible if you have a "permanent" policy as opposed to a "term life" policy. Paying the money back into the insurance policy is also optional, but this also means less money for beneficiaries after your death. Speak to your life insurance agent regarding the actions required to borrow the money.

2. Sell items in your home. These can be anything from the family's unused television to an heirloom that the family no longer wishes to own. Hold a yard sale, place your items on an Internet auction site, or sell these items to a friend or family member.

3. Acquire a loan from a friend or family member. Ask parents, grandparents or siblings who are financially capable for a short- or long-term loan. To make the entire process more professional for both parties, hire a lawyer, and sign a contract indicating the loan will be repaid in a certain amount of time. The family member may also be willing to give the money as a gift.

4. Acquire a loan from a bank. This may require a family member or friend to act as a co-signer. The bank may also require that the borrower has collateral, such as a vehicle, a first home or any other item of value.

5. Apply for a home buyer assistance program in your area. These are federal and state programs that are designed to help potential homeowners by offering them loans or grants that can be put toward the down payment and closing costs. Eligibility requirement may apply and will differ from state to state. For instance, the state of Michigan offers an assistance plan to low and moderate income home buyers that does not require repayment until the property is refinanced, sold or after the mortgage has been paid in full. Contact the U.S. Department of Housing and Urban Development for specific assistance programs in your area.

6. Save money for the down payment. Set up a separate bank account that is solely for the down payment. Cut down on unnecessary monthly expenses such as cable service, cell phones and eating out. Place this extra money into the account. Have a small portion of each paycheck deposited directly into the account, or set aside a certain percentage of each check.

References

• Mortgage Loan: Quickly Raising Money For a Down Payment
• Money Under 30: Down Payment Saving---Five Steps To Save For Your First Home
• Michigan State Housing Development Authority: Down Payment Assistance
• National Association of Realtors: Housing Opportunity Program, 2009 Housing Opportunity Pulse Survey

Resources

• U.S. Department of Housing and Urban Development: Local Homebuying Programs