Coming up With a Down Payment
Despite rising home prices, homes across the United States are selling extremely fast, many within three weeks of hitting the market. Combine this with the fact that most homes sell for close to 99% of their asking price, and it’s clear why an increasing number of homeowners are making the decision to sell.
This creates a challenge for first time home buyers who often struggle to come up with a sizeable down payment. Most mortgage lenders require a down payment of at least 3%. This totals $15,000 on a $500,000 home. While current homeowners can sell their existing property and use the equity as a down payment, first time buyers simply do not have this option. They must come up with the money for a down payment on their own.
Many would-be homeowners are becoming more creative to save for their down payment. Some are reducing their living expenses, or temporarily supplementing their income to regularly contribute to savings. These temporary changes make owning a home a reality.
There are several traditional as well as non-traditional ways to come up with a down payment. First time home buyers should explore their options.
Gifts from Friends and Family
It’s not uncommon for young couples and families to ask friends and family to contribute to their down payment. This benefits both the recipient and the giver. In addition to feeling great about helping someone purchase their first home, the giver may also get a tax write-off depending on the amount of money given. It’s important to note that the IRS only allows individuals to gift up to a certain amount before the recipient must pay taxes. The actual gift amount can change at any time so it’s important to check with the IRS prior to accepting any cash gifts. Please visit https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes) for more information.
Forgo the Expensive Wedding
Many young couples are making the bold decision to forgo the costly $100-150K wedding bash in order to utilize those funds towards a down payment. Many elect to have a modest wedding and their families help them with the goal of home ownership. In some cases, they will set up a GoFundMe account in lieu of gifts so their entire social circle can be part of the process. With help from friends and family, first time home buyers can often make a larger down payment, making it possible to keep their mortgage payments closer to rent.
Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.