USD bills and contract on tableUSD bills and contract on table


By: SunnyHill Financial
Homebuying can be quite a stressful time and finding the funds for a down payment can add to this stress. Not to worry, there are many different ways you can fund your down payment. It is important to evaluate your assets and determine where you may be able to supply the funds from. There are many different ways to satisfy a down payment requirement, depending on what options you qualify for.

What is a Down Payment?

A down payment is the cash you’ll pay toward the purchase of your new home. The more you are able to put down upfront, the less you will have to borrow, allowing for lower mortgage payments. This is your contribution towards the initial ownership in the home and the lender provides the rest to purchase the property. Most lenders will require a down payment for a mortgage, with exceptions for VA loans and USDA loans that are backed by the federal government.

Sources of Down Payment

Sourcing your funds is key to helping you purchase your new home. Evaluating all of your options will help you determine funds available.

Personal Assets

Personal Assets can be from saving funds in your checking or savings account. Other great ways to gain personal assets are to plan to save your tax refund, inheritance, or selling any assets you may have. Do you own a boat that is collecting dust or another car that hasn’t been used? Selling these can help you secure extra cash that can be used for your down payment.

Retirement Accounts

Although this is not the first option, it is an option to evaluate when funding your down payment. Borrowing from your 401k or IRA, can help you tap into funds early. It is important to remember that there are tax penalties when withdrawing funds early and the money must be paid back. You will need to review your terms of withdrawal and the repayment terms.

Local Programs

There are federal assistance programs that can help offer funding options. These are usually focused more on first time homebuyers or those with low, moderate incomes. These programs can sometimes require education classes or you must buy a home that meets criteria, they have outlined. Each program will be different, so it is important to reach out to them early to see what their qualifications are.
These can be offered through:
  • State Housing Finance Agencies
  • City and County Programs
  • Housing Authorities
  • Non- Profits
  • Employers

Gift Funds

These are gift money, a family member or friend is willing to gift to you, to help toward your down payment. There are guidelines for gift funds and requirements for a gift letter. If you decide to go this route check out our post on Gift Funds and What You Should Know for guidance on gift funds.

Making small changes and doing a little research will allow you to come up with the money for your down payment. This way you can enjoy your new home without any worries.