20 Ways to Find Down Payment money!

HUGE MYTH:  Did you know that 39% of homeowners think you need more than 20% down to purchase a home according to a 2017 NAR survey?   The overall average down payment in 2017 was 11% and that included people with lots of equity.  The truth is you can get a home loan with zero down if you are a Veteran or buying in many rural areas (USDA).   Otherwise you will need 3.5% down for FHA and as little as 3% for some conventional loans.  Here are several suggestions on how to dig up and find money for your down payment!  Not all the ideas will fit you…but perhaps some will.

• Save your Tax Refund: The average tax refund is $2,893 in America.    Save the whole amount and you get a good start towards your down payment!   With 2-3 years you about have it!
• Save your Bonus or other windfall money! Pretend the monthly, quarterly or annual bonus isn’t coming and save it instead!  Keep your lifestyle the same.   Pledge to put every gift of cash, purchase refund and work bonus into your down-payment account.   Stash away every raise as if it never happened.  Have the difference between your old and new paychecks funneled automatically into your down payment account.  Use inheritance money for a down payment account to cement your loved one’s legacy.
• Ask for a Raise! Assuming you are a great contributor at work…check out Glassdoor to learn the typical salary range for your job and ask for what you deserve.  With unemployment rates hovering near all-time lows, good employees can now get deserved raises.
• Start a Side Hustle! Side Hustles can be done in your car (Uber, Lyft, DoorDash), taking freelancer jobs writing, graphic design, website mgmt. and so much more (Freelancer.com, Upwork.com, fiverr etc.). Share your car on Turo, start taking surveys on Survey Junkie or InboxDollers.  Teach classes through online portals such as Udemy.  Grow and sell your own produce or flowers.   Sell crafts on Etsy or at a flea market.  Work as a virtual assistant on Upwork or Guru, remote customer service rep or tech support.  Become a billboard by wrapping your car from FreeCarMedia.   Wingsplay will pay you to share videos on Facebook, twitter or your blog.    Sell your photos on Shutterstock, IstockPhoto and 123RF.   Put as much of the side hustle pay into your down payment account.  Grab a second job during the holiday season.  Set a specific time limit  and goal so  you don’t burn yourself out.
• Gifts from family! Did you know that 28% of all borrowers in their 20’s got a gift from relatives for their down payment and 21% of those younger than 38 did too?    The donor will have to sign a gift letter stating that the money “does not need to be paid back” and strict documentation of the transfer is required. A MortgageOne professional can assist you through the steps.   The family gift may be tax deductible up to $15,000 per year per person (make sure the donor checks with their tax professional).
• Sell Stuff! Sell anything of value!   Sell your car, boat, bicycle, motorcycle or expensive exercise equipment.   Do without or replace the car with a cheaper “beater-car”.  Sell any other possessions you don’t need, or which can command a decent price.  Have a garage sale!   Sell your stocks, bonds or mutual funds or other investments.  Sell your baby gear, kid’s clothes, purses, toys, video games and electronics on Craigslist, eBay or Amazon.  Sell your furniture through consignment stores.     Ask your relatives if they have something you can remove from their house as a service and sell online…. you would be surprised what they might have.  Melt down your gold jewelry.  Sell your collectibles or household goods you no longer use.
• Lower your Food bills and save the money! Stop eating out for an agreed upon timeframe, make your lunch and take it to work, don’t go to the drive-through or get your expensive Starbucks coffee.   Save money at the store but shopping with a list (or calling it in for pick up), only going to the store once per week, shop at cheaper stores, cutting back on pre-packaged foods.  Make a food plan and stick with it.  Purposely put that saved money into your down payment account.   This can be a fun game!
• Apply for a low down payment loan! VA (for Veterans) and USDA loans (many rural areas) come with zero down payment!  FHA loans have 3.5% required down payments.   Conventional loans offer down payments as low as 3% with good credit.
• Apply for a State of local Down Payment Assistance Program (DPA)! Many states have down payment assistance programs, implemented by government agencies, non-profits and foundations.  Some require low cost housing or in targeted census tracts, but many don’t.  A Mortgageone Loan Originator can help you match up with the right program.
• Do an “Insurance review” and set aside the savings! Re-analyze your insurance coverage.  Shop around for new providers of car, home, boat, liability coverage.   Higher deductibles could lower your payments.  Ask providers how you can reduce your premiums and evaluate the risk.   Most people can make a few phone calls and save hundreds to thousands per year.   Purposefully put the savings into your down payment account.
• Downsize your lifestyle! Move into your parent’s basement, find a smaller apartment, apply to manage apartments for free or reduced rent, sell an extra car, take your lunch to work.  Ditch cable.  Pay with cash (you spend more when you pay on credit).  Do whatever it takes in the short term for the long-term goal of homeownership!   Make a plan!   Go on a spending “diet”.  Re-think date night with free activities.  If you have extra space in your current home, find a roommate.  If you live a spot that is popular with vacationers, sign up for    Instead of giving gifts to your spouse, mutually agree to deposit the value of those gifts into your down payment account.  Cancel your gym membership and exercise at home.  Cancel streaming services such as Netflix.  Cut out luxuries such as manicures and massages.
• Use a budgeting app! Pay into your down payment fund first!   Use a budgeting app like Mint, Pocketguard, Wally, Goodbudget, Mvellopes or Simple.   You need a budget to keep on track.   Every dollar should have an assigned use…. either bills or saving.   As you complete this process, you will see things that you can eliminate or reduce permanently or temporarily.
• Ask your employer for help! Some companies, colleges, universities and state or local governments have programs to help employers with down payments.  Ask your Human Resources department about the possibilities When negotiating a job, you may ask your new employer to include down-payment assistance as part of your compensation package as a signing bonus  or  relocation assistance.
• Take a higher rate and have the lender credit you to cover closing costs so all your savings can go towards your down payment! MortgageOne can often provide a little higher rate and credit you with enough money to cover your closing costs.  Likewise, ask the seller to contribute towards closing costs as part of the contract negotiation to allow all your money to go towards your required down payment.
• Utilize automatic deposits! Set up automatic deposits out of your paycheck or from your bank after payday each month to your down payment account.  If you never see the money it is easier to save.   If you are looking to open an account, go with bank account promotions offering you a couple hundred to open an account.  Humans are hard-wired to focus on the present…. creating one or many auto drafts helps you overcome the psychological barrier to saving and investing per Harvard Business School research.
• Recurring Deposits! Knowing you need to set money aside each month is one thing.  Actually doing it is another.   Set yourself a calendar reminder on the same day each month or pay period to transfer a set amount of money – at least 5% of your take home pay and ideally 10%- into your separate down payment account.
• Use rounding up apps! Some major banks, including Bank of America (Keep the Change) and US Bank (START) empower deposit account holders to save their spare change on every transaction by rounding debit card payments up to the nearest dollar and sock the remainder in a savings account. Chime or Acorns are other options.
• Crowdfunding or FHA’s Bridal Registry!   Sites like “Featherthenest.com” set up an account to allow family and friends to contribute to your “nest” for weddings, birthdays, baby showers or just moving into your new home instead of giving you other gifts.   The FHA Bridal Registry allows many people to contribute small amounts to your down payment without documenting each transaction.
• Cash back credit cards! There are literally hundreds of cash back credit cards on the market.  Some like Chase Freedom and Capital One Quicksilver Cash rewards are huge.  Some offer up to 5% on certain spending categories.  Some have attractive sign-up bonuses worth $100-200.   A cash back card won’t finance your down payment, but it can boost your saving efforts.  Go with one without any annual fees.
• Borrow against or withdrawal from Retirement Accounts Though this is one of my least favorite methods to find your down payment because it could set back your retirement nest egg, it is an option. You can withdraw 10,000 per person from your IRA without penalty for first time home purchases.  You must pay taxes of course on a traditional IRA but a Roth IRA held for over 5 years, can be withdrawn tax-free.   Employer sponsored 401K plans require a 10% penalty and payment of taxes or you can borrower against your 401K.   (check with your tax professional on all these details).