COMMON QUESTIONS
HOW CAN I COVER MY DOWN PAYMENT AND CLOSING COSTS IF I DON ’ T HAVE CASH RESERVES ?
Down payment and closing cost funds can come from several resources . First , of course , is your own savings or equity from the sale of your old home . For some buyers , especially firsttime buyers , that is a difficult task . That ’ s why many lenders and government agencies allow purchasers to receive money from sources other than their own pocket .
CO-SIGNER A co-signer on a loan is a person who applies with you for a mortgage . It also means that person will take on risks associated with a loan , such as being held accountable for the payments if you default on the loan . In addition , this debt will appear on their credit report .
LOANS You can borrow from your 401 ( k ) or Individual Retirement Account ( IRA ) for down payment money . While you will lose the investment dollars until they are paid back into the account , you are allowed to pull that money out without penalty and then repay it over time . Keep in mind that the loan is calculated in your debt / income ratios . Check with your financial advisor on any tax consequences before pulling your money out of retirement savings plans . Many lenders offer 100 % programs or gift assistance programs .
PERSONAL ASSETS Cash can be drawn from other investments and assets you may own . Stocks can be sold for cash , as can items such as a second car , boat , etc . If you want to hold onto those items but still need the equity out of them , you can approach your bank or credit union and apply for a loan secured by those items . Again , the monthly payment will be added into your debt / income ratios . It is advisable to consult with your lender before obtaining any additional loans .
SELLER As your buyer ’ s agent , we may be able to negotiate seller subsidies in the contract negotiating process . Many loan programs will allow the seller to assist the buyer with up to 3 % of the sales price . Sellers can also pay for points or a number of items paid for before settlement . It is very common in our marketplace for sellers to contribute to the
10 | THE BUYER ’ S EDGE | A GUIDE TO PURCHASING A HOME