Title:
Down Payments –
Get Creative
Word Count:
359
Summary:
One of the
biggest hurdles to buying a home is the down payment. Saving up a chunk of
change can be difficult, so getting creative is a key.
Keywords:
down payments,
home loan, saving, 401k, borrow, 401k loans, real estate, mortgage loan, down
payment
Article Body:
One of the
biggest hurdles to buying a home is the down payment. Saving up a chunk of
change can be difficult, so getting creative is a key.
Down Payments
The amount of your down payment is dependent upon many potential issues, but
two come to the forefront. Each of these can reduce or increase the amount of
cash you have to come up with for the home of your dreams.
1. Credit Score – Generally, the better your score, the lower the down payment.
2. Price – The selling price of the home is key because the down payment is
expressed as a percentage of the home price or appraisal amount.
Either way, the down payment can amount to a serious chunk of change. For many
first time buyers, this is a huge hurdle to overcome. They skimp and save
everything they can, but saving up many thousands of dollars can take time and
be frustrating. Fortunately, many first time buyers have already been saving up
for their down payments, but don’t realize it.
Getting Creative
The Bank of You – The federal government looks very favorably on home
ownership. This means it makes every effort to promote the real estate market
through incentives and tax breaks. Once such incentive is a unique little twist
built into the laws controlling 401k savings plans. The tweak in these laws
allows you to…well, borrow from the bank of you.
With most 401k plans, you have the right to borrow up to 50 percent of the
vested amount of your account. If you’ve managed to save $50,000 over the years
in your 401k, you can take a loan from the account for up to $25,000. This, of
course, should be used for the down payment on your home. After getting into
the home, you can simply pay off the 401k loan over five years or you can take
out a home equity loan and repay it with that money.
In essence, you have used your 401k money to play a shell game with the down
payment. In the end, this creative down payment funding strategy gets you over
the down payment hurdle and into your home.