This weekend is Super Bowl Sunday. This is always an exciting time of the year for me, and Im not just talking about the big game. I expect New England will dominate, and hopefully the Giants will make a game out of it, and we wont stay tuned just for the commercials. I enjoy the beer and the food and the chance to visit with friends. But thats not why Im excited either. Here in Chicago, Super Bowl Sunday traditionally represents the start of the Spring home buying season. As a mortgage banker who loves working with first time home buyers, thats a great reason to get excited.
Are you a first time home buyer in the market for a new home? With the Chicago area home market slow, and interest rates low, this could be the best time in years to buy your first home. It is a buyers market, and you can find bargains if you are ready to go.
One of the biggest hurdles keeping people from buying their first home is coming up with the money for the down payment and closing costs. The good news is there are a lot of ways to buy a home, even if you dont have much cash. If youve been saving and you have ready cash, thats great. But if you dont, there are still ways to raise what you need to buy. Here are a few random ideas:
- Lotto tickets. Well, maybe not. If youre truly lucky you might be able to buy a home and skip the mortgage. But odds are against it. Big time.
- Tax refund. This is what usually gets the Spring market going. You’ve received your W2s by now, and refund checks will be in the mail shortly. Your refund might be just enough to get you into a home.
- Stocks, savings bonds. Do you have any savings bonds that are tucked away? Many people have stocks and bonds from gifts years ago. A good use for them might be to buy your first home,
- Gift from a relative. Many programs allow the down payment to come from a gift from a relative. If you have a generous relative who is willing to help, this could be just what you need.
- Cash out your 401k. If you have money in your company retirement plan, you can liquidate it and use it for your down payment. Because you didn’t pay taxes on it up front, you will have to pay taxes on the amount you liquidate as well as a penalty for withdrawing it early. This can still be a good option in some cases, but a better option might be –
- Take out a loan against your 401k. The advantage here is that you are paying your self back and you still have your retirement account. Most plans will let you borrow up to half the value in your account, and the interest rate and terms are set so the payment (to yourself) will be affordable.
- Sell something If you’re like most people, you probably have more stuff than you know what to do with. Some of this stuff may have value, if you are willing to part with it. Do you have a boat or a motorcycle? How about baseball cards or other collectable’s? EBay makes it easy to convert stuff, to cash, and this could be just what it takes to get you into a home.
- Down payment assistance programs. Nehemiah and AmeriDream are two versions of these programs. These are non-profit groups that, in a sense, launder a credit you negotiate from the seller in a way that you can use it for your down payment. These are usually used in conjunction with an FHA loan. I’ll post more on these later. If you have questions on how they work, give me a call.
- Government grant programs. There are programs like the Chicago Bond Program and the Illinois Bond Program, which provide you with a grant at closing for the money you need for the down payment and closing costs. You need to meet the guidelines, but if you qualify it is often the best way to buy.
- Look at the long range. Maybe you don’t have the cash to buy what you are looking for, but this might be the time to put yourself on a savings program so you will have it down the road. What can you do now to get extra cash? Can you take on a second job? How about cutting your expenses? You might be surprised at how much you can save if you have a goal and a plan.
There are lots of ways to buy without having a lot of cash. Use your imagination and you can come up with some more ways to come up with the down payment.