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Claudia Hargrove Thoughts

1. Go local.

Gone are the times when nationwide programs allowed for the zero-down loan, the federal home buyer tax credit, and the use of tax credit funds toward down payment and closing cost requirements.

The best programs of this sort are now largely operated by local governments—primarily cities and counties—and the rules for qualifying vary. Some are exclusively for buyers with low or moderate incomes; others are dedicated to helping first-time home buyers. Many of these programs have a limited pool of funds that may run out over the course of the fiscal or calendar year, and almost all of them require buyers to jump through some hoops, such as completing homeowner education classes or choosing a home that meets specified criteria.

2. Hit up your relatives.

Most mortgage programs will allow for some portion of your down payment to come in the form of “gift money, “which is exactly what it sounds like: money someone gives you to help you buy a home.

While gift money may sound great, be aware that taking gift money from a relative can create relationship issues or come with emotional strings attached. Plus, lenders frequently require that gift money be accompanied by a letter that clearly states the money is a gift, not a loan. The lender may also want to see a bank account statement from the giver, proving that the money was theirs to give.

3. Ask your employer.

Universities and municipal departments that employ first responders such as police and firefighters frequently make down payment and other home-buying assistance programs available to staffers. Large employers or even smaller companies seeking to lure top-level recruits do something similar: relocation assistance programs.

Check in with human resources to explore whether any such assistance is available—and if you happen to find yourself a hot prospect on the job market, consider trying to negotiate relocation or down payment assistance into your offer package.


4. Tighten your budget.

Get gut-level real with yourself about what’s truly important to you. If the answer is buying a home, then it’s time to examine your spending and look for leakage that you can redirect to your down payment savings.

If you spend $20 a workday on a morning coffee and bagel and a takeout lunch, that’s at least $400 per month—almost $5,000 a year you could be saving. And those numbers are not inflated to reflect big-city prices. Nor is the $100-a-month cable bill, the $15 yoga class, or the $2,000 vacation.

5. Borrow from yourself.

There are situations in which it may make sense to borrow a few thousand dollars from your 401(k) or IRA.

Some retirement accounts allow you to borrow against or pull out funds, penalty-free, to apply them toward your down payment on a home. Is it advisable for everyone, in every situation, to deplete their 401(k) or IRA to plug that cash into a house? Absolutely not.

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