Every American dream includes becoming a homeowner one day, but costly down payments on houses make it a pipe dream for many. Lenders usually ask for as much as 20% down payment of the price of a home. If you pay less than that, you risk being put under private mortgage insurance (PMI). This protects the lender in the event that you default. The PMI goes away only when the mortgage is under 80% of the price of the home. It might seem difficult to come up with funds to cover a down payment, but it’s not impossible.
Here are some ways you can come up with the funds needed to make that down payment on your dream home:
Supplement your savings with a loan
Flexible home loans can make a down payment more affordable, especially if you already have some money saved up. The money you receive from a loan can help supplement whatever you’re still missing for the down payment. A conventional loan is an alternative to VA, FHA, and USDA loans. This kind of home loan is a popular choice for Utah homebuyers in Provo.
Ask for a gift from family and friends
Friends and family members might be willing to lend you cash to add to your down payment. A good incentive for them to do so would be the fact that they can also get a tax write-off for their contribution. The IRS allows people to give gifts amounting to several thousands of dollars per year tax-free for both the donor and the recipient. Lenders are also willing to take down payment gifts. But they need documentation from your family or friends to verify in writing that they made the gift, and also that they are financially able to make such a donation. They may also have to provide bank statements and a letter confirming that the donation is a gift, not a loan.
Sell your belongings
The hardest part about moving into a new home is packing up all by yourself. Sort through your belongings and determine which ones are the most important to you. Sell anything else that might not be useful to you anymore. There are plenty of apps and websites that make it easy to advertise your items. There will always be someone interested in cheap furniture, gadgets, and clothes. Selling your used goods will definitely help you come up with a way to raise cash for your down payment.
Generate extra income with a side hustle
A part-time job, side gig, or passive income strategy will help you earn extra money on the side to help supplement your main income. If a part-time job is too much of a commitment, you can monetize your hobbies, talents, and even your belongings. You can offer freelance services on sites like Fiverr or advertise them on Craigslist. You should also look into passive income opportunities. Passive income is income generated with little effort from you. These could include things like renting out your property, affiliate marketing on blogs, and advertising on your car.
Don’t give up on your dreams of owning your ideal house. Saving up for that expensive down payment requires effort and patience, but it’s not impossible to save up the whole amount.