A house will likely be the most expensive thing you buy in your lifetime. Homes don’t come cheap. A typical mortgage takes about 30 years to fully pay off. That’s not including the down payment and closing payment you will be expected to pay as a homebuyer. A good majority of new homebuyers struggle with paying these costs. The younger you are, the more difficult it will be for you to cover these costs. So here are some top tips that will help you get the down payment and closing costs you will need in order to finalize the deal on your dream home:
The least expensive and most difficult method to secure the down payment or the closing cost is to save money. If you cover these costs with your savings, you will not have to pay extra as interest and accrue more debt. However, saving the required amount will take a long time, during which the housing prices can spike. Therefore, plan to save only if you can generate the amount needed in less than a year.
2. Special Assistance
Some government programs allow homebuyers to cover the down payment or closing costs with special grants or bonds. Some states have specific down payment assistance programs to help ease the burden of buying a home. These programs may cover the costs of a down payment completely or partially. Typically, down payment assistance provides funds for at least 5 percent of the total required to close a deal. The caveat is that these programs are not universally available, and some homebuyers may not qualify.
If you have investments, you can use the profits or assets to help cover a down payment. For example, if you have invested in the stock market, you can sell your shares and use the money for the down payments. Liquidating assets in this way is one of the most commonly used tactics to cover the cost of buying a home. However, make valuations carefully. If you are selling stocks or shares, sell ones that are vulnerable to volatility. Assess the value of the investment carefully against the value of the property you intend to buy first.
4. Borrow from Friends or Family
In case you cannot secure funds using any of the above methods, you will have to borrow the amount needed. The best way to borrow is to ask for some, interest free, from friends or family. You can consider these as gifts in your loan plan. Make sure that the mortgage plan you intend to buy considers financial assistance from family as gifts.
5. Take out a Loan
The other way to borrow money is to take out a legal loan. When you apply for a mortgage, the bank won’t give you another loan for the down payment or closing costs. You can seek a personal loan; however, these are very expensive. You will most likely struggle to pay it back along with the mortgage. Instead of a personal loan, seek a secured loan. You will have to present a valuable or an asset as collateral for one of these loans. For example, if you own a boat or a diamond necklace, these could be held as collateral for a loan to cover the money you need. Secure loans, in general, have reasonable interest rates compared to personal loans like payday loans. Therefore, this may be the ideal option for most homebuyers.
Carefully think about each of the above mentioned methods for getting enough money to cover the down payment or closing costs. Choose the one that best fits your needs and will not make your debt situation worse.