Alternative Ways to Accumulate Down Payment

Lending Options

In addition to savings accounts and the proceeds from a home you already own, there are other less

obvious sources of funding as well. These include:

Home Equity Loan -

Your parents or other family members may have a considerable

amount of equity built up in their own home that they were planning to borrow against in order

to gift money to you for your upcoming home purchase.

Life Insurance -

If you have a cash value policy, it may have accumulated an adequate

amount of "available" funds from which you can borrow. More often than not, the interest

rates on this type of loan are very favorable.

Stocks and Bonds

- If you do not wish to sell your portfolio or feel this is an inappropriate

market in which to do so, then perhaps you can use it as a form of collateral.

Company Profit Sharing or Savings Plan

- Check with your employer to see about the

possibility of withdrawing or borrowing from what you have in your account(s).

Retirement Savings Plan (401k)

- If your employer offers this type of plan in place, inquire

about the possibility of withdrawing or borrowing from this account as well.

If the above suggestions do not apply to you, there are still other possibilities:

Mortgage Insurance

- Purchasing this form of insurance (usually through the lender) can

reduce the down payment required. Private Mortgage Insurance (PMI) protects the lender in

case of default and allows for an approval of a larger loan amount.

First-time Buyer Financing

- If you have not held title to real estate in the past three years,

you could qualify as a first-time buyer, which could mean special financing from your state or

local housing agency. This usually means a smaller down payment or a lower interest rate, and

in some cases both.

VA Loans

- If you qualify for this loan type, many times you can get financing with "zero

down."

There are also many types of government-backed loans for various situations, and literally

thousands of loan programs offered by different lending institutions. Your lender can tell you about

the ones for which you may qualify.

Determining your target price for a house is dependant upon the financing terms available to you as

well as the amount you have available for a down payment. The monthly payment usually consists

of principal with interest, plus taxes and insurance, also known as P.I.T.I. Some lenders, however,

also may require mortgage insurance when the down payment is less than 20%. When you consider

these added expenses, you'll soon realize the term "affordability" means more than just the price of

the house itself.