Ways to Fund Your Down Payment and Closing Costs

Afraid that you won't be able to find the funds you need for your down payment or the closing costs to buy a home? Think again! There just might be some ways to find it.

You can buy a home with a 3.5% down payment through FHA (Federal Housing Administration) loan.  For conventional loan, you are required to have at least 5% down on the purchase of a home.

There are at least 5 different ways you can come up with the down payment and closing costs so you can buy a home:

1. Gift Money

Gift of funds or gift money is a monetary gift that is given by a relative or a close friend. He/she must sign a gift letter, provide a copy of a bank statement showing that he/she is financially capable of gifting the down payment money and he/she must show proof that the funds came from and has been withdrawn from his or her account and deposited to your account.

2. Loan from 401 (k) or Retirement Fund

You can borrow funds from your 401(k).  If you borrow, just keep in mind that it will be considered a loan and the lender will include it in your total debt obligations and include the total monthly repayments in your total debt-to-income ratio. 

3.  Sale of a Personal Asset

You can sell your car, stamp or coin collection, jewelry, art or an RV or any other assets you may have and use the proceeds from the sale to purchase your new home.  Take note, that you need to provide proof of the transactions. 

4.  Trust Funds, Lottery Winnings etc.

If you receive money from your trust funds, lottery wins or other means, you can use this money as a down payment and/or closing costs on the purchase of a home.

Again, all paper trails must be presented.

5.  Loans Made Against Assets

If you can secure your loan with an asset, then there's no problem in obtaining a loan as long as use these assets to secure your loan.  These assets can include stocks, bonds, mutual funds and real estate (separate from the property being purchased).

Funds borrowed from cash value of life insurance policies can also be used for down payment and closing costs. 

Consult with a mortgage lender if you will be receiving any funds to help you with the down payment and/or closing costs on the purchase of a home.  This will save you a HUGE amount of time and headache!