Buying your first home is an exciting yet often daunting experience. One of the biggest challenges you'll face as a first-time home buyer in California (or anywhere else) is securing the necessary down payment. But don't fret! You're not alone, and there are various ways to gather the funds you need. In this comprehensive guide, we'll explore 12 different ways to secure your down payment so you can take that crucial first step toward homeownership.
1. Your Trusty Savings/Checking Account
Documents Needed: Two most recent bank statements.
Your savings or checking account is the most straightforward source for a down payment. Lenders typically ask for the two most recent bank statements to verify your financial status. However, if there's a sudden increase in your account balance or it's a newly opened account, be prepared to offer a credible explanation and source documentation.
2. Cash Saved at Home
How to Verify: Written explanation and supporting documentation.
In most cases, cash saved at home doesn't qualify. However, certain exceptions may apply if you can document:
How you accumulated the funds
The time it took to save them
Spending habits
Income stream
Documented expenses
History of using financial institutions
3. Retirement Accounts
Documents Needed: Most recent statements.
You can tap into Individual Retirement Accounts (IRA), 401(k), Thrift Savings Plans, and Keogh accounts. Up to 60% of these assets may be considered in your mortgage application. You can also borrow against your 401(k), but remember to check the terms and conditions.
4. Stocks and Bonds
Documents Needed: Most recent portfolio statement.
Stocks and bonds can be liquidated to generate cash for your down payment. Lenders will verify your actual receipt of these funds, so make sure to document the process.
5. Savings Bonds
How to Verify: Proof of original purchase price or confirmed redemption value.
Government-issued bonds can also serve as a down payment source, counted at their original purchase price unless you can confirm the redemption value.
6. Gift Funds
Documents Needed: Gift letter.
Family, employers, or even charitable organizations can gift you the funds you need. You'll need to provide a gift letter that outlines the specifics of the gift and confirms no repayment is expected.
7. Down-payment Assistance Programs
Assistance programs from city, county, or state organizations can offer you the much-needed funds for your down payment.
8. Sale of Personal Property
Documents Needed: Proof of sale and ownership.
Selling personal property like cars, RVs, or collectibles can offer a quick injection of cash. Make sure you can prove ownership and the sale of these items.
9. Sale of Real Estate
Documents Needed: HUD-1 Settlement Statement.
Selling other real estate properties can net you enough cash for your new home's down payment. Make sure to provide the HUD-1 Settlement Statement as evidence.
10. Collateralized Loans
How to Verify: Evidence of loan secured by assets.
Another option is to take out a loan backed by existing assets like investment accounts or real estate properties other than the one you're buying.
11. Disaster Relief Grants and Loans
Grants or loans from agencies like FEMA can also be applied to your down payment if you qualify, especially if you've been affected by a natural disaster.
12. Employer Assistance Plans
Some employers offer assistance plans that cover:
Closing costs
Mortgage insurance premiums
Down payment
Get Pre-Approved for a California Mortgage
Before you jump into the home buying process, getting pre-approved for a mortgage will give you a clearer idea of your budget and make you a more attractive buyer.
By leveraging one or a combination of these 12 methods, securing your down payment becomes a more achievable goal. Take that first step toward owning your dream home in California today!
——————-
Best Option Mortgage is a DBA of ML Mortgage Corp. ML Mortgage Corp. is a state-licensed mortgage lender, NMLS ID #362312, licensed by the CA Department of Financial Protection and Innovation under the Finance Lenders Law, License #60DBO69831. For other states, visit www.mlmortgage.net. To verify licenses, visit www.nmlsconsumeraccess.org. All loans are subject to credit approval and acceptable collateral. Additional terms and conditions apply. Programs, rates, terms, and conditions may change without notice. Not all programs are available in all states. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. © 2024 ML Mortgage Corp. All rights reserved.