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How To Secure Your Down Payment Money

Grant Muller

Sell for More with Grant Muller...

Sell for More with Grant Muller...

Jan 30 7 minutes read

When you are buying your next home, you’ll need a nice chunk of change to cover your down payment. In most cases, you’re only expected to pull together enough money for a 3.5% down payment. You also might be planning to put down a full 20% payment. Regardless of your percentage, a down payment is one of the largest expenditures you’ll ever have to make. You need the right cash sources to fulfill your down payment money, and sometimes that is easier said than done. How can you possibly scrap together enough cash to afford that down payment?

As a homebuyer, you probably have plenty of sources for your down payment money hidden in plain sight! You just have to know where to look. We wanted to take a deep-dive into a few of the most frequently neglected sources of down payment funds. A few of them might surprise you!

1. Your Monthly Budget

If you’re serious about buying a home, then you need to squeeze every penny as you lead up to the down payment. Set aside some time to comb through your monthly budget with your significant other. We’re positive that there are some expenses that you can cut back on! Go through your line items one at a time and ask yourselves, “Can we eliminate this expense until we’re moved in?”

We’d wager that you’ll find some daily and weekly costs that you can cut back on. Just consider how you eat out every week. Let’s assume that you eat out 4 or 5 times per week. That adds up to roughly 18 restaurant meals every month. If the average meal outside the home costs $12.75 per person, then you might be wasting nearly $240 every month on meals outside the home. That’s nearly $2,750 per year! That money could be put to better use by covering your down payment. With those savings in your pocket, turn to your other monthly expenses too. You can save tons for down payment money by cutting out cable bills, switching cell service plans, taking public transit, and so on. All those savings will speed up your home buying timeline.

2. Your Things.

All of those things that you collected over the years could be a hefty treasure trove for your down payment money. Take stock of the possessions that you currently own but don’t use. Those items could present great ways to make some extra cash for your down payment. You can sell a great deal of your stuff online these days and buyers are always eager to pick up great finds.

Go through your attic, garage, and extra closets to find items you can get rid of. These could include things like:

  • Automobiles (e.g., RVs, motorcycles, cars, etc.)
  • Old clothes, nifty costumes, designer shoes, and accessories
  • Hobby-related gear (e.g., bikes, boats, skis, golf clubs, etc.)
  • Out-dated furniture and antique objects
  • Unused electronics, books, and the like (e.g., old TVs, dusty computers, old smartphones, CDs, etc.).

You might be thinking, “No one in their right mind would want to buy this old stuff.” Don’t be too sure about that! There are plenty of people that will pay you handsomely for your things.

3. Your Personal Skills.

If you’d rather avoid selling your things, then use your own two hands to get some extra cash! Use your off-time from your full-time job to leverage your skills and hobbies to make more down payment money. With a few weekends and your own creativity and know-how, you can easily gain some much-needed cash. 

Think about what kind of work you would like to do. Are you a creative and crafty person? Then maybe you can stock virtual shelves on Etsy with your crafty little creations! Would you rather provide something for your neighborhood, family, and friends? Try spreading the word that you’ll do odd jobs for your close acquaintances. Or you could list your potential services on trusted sites like TaskRabbit. One of my friends actually earned thousands of dollars just by dog sitting for friends and family while she worked from home. Making money through these side services is just that easy! Even research gigs or bookkeeping projects can rake in tons of extra cash for your down payment funds.

4. Your Closest Friends & Loved Ones. 

You might be surprised at home many home buyers call upon their friends, family, and others for support when buying a home. Did you know that most mortgage programs allow for some part of your down payment money to come from “gift money?” It’s true! Your closest friends and family members can contribute to your down payment too!

Ideally, you should try to figure this money situation out as soon as possible. Contributions for others will impact your own savings targets and lender’s documentation requirements. If a family member or a friend has offered to contribute money to your down payment, make sure you express your appreciation and let them know your buying plans. It’s important to go over everything as far in advance as possible, to clear the air for logistics and tax obligations later.

Before you get started though, you should just check in with your mortgage lender. They’ll detail to you how much of your down payment money can be satisfied by gift money (this can be different from situation to situation). In most cases, a gift letter will be required by the lender in addition to the gift money. Be prepared to have the paperwork to back up your gift money, so that there is no ambiguity over whether this is a loan or a gift.

5. Your Financial Assets. 

We hope that as you prepare to buy a home, you have some financial assets in addition to your savings account. These could be valuable tools when you’re trying to gather enough funds for your down payment. In some cases, you can pull out funds, penalty-free, from your retirement account and apply them towards your down payment. Of course, this shouldn’t be your first choice for getting funds for your down payment. It might not be wise to tap into your 401K or IRA for support on your down payment. Make sure it makes sense for your specific situation and your individual circumstances.

Talk with your financial advisor first before you make this critical move. Pulling funds from your 401K to get your down payment to the 20% mark could make sense, but it might not be the best choice for you strategically. Take the time to at least explore this idea with your advisor before making a final decision on your down payment money.

Find The Right Home For You

When you've finally acquired the necessary funds for your down payment money, you'll need to find the right home for your family. Grant Muller of Spaces Real Estate can help you there.

Grant will take into account all of your family's needs, must-haves, and more before he starts the search for your Denver dream home. Contact Grant Muller today to put your down payment funds to good use.

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