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Mortgages

Where can I get money for a down payment on a home mortgage?

It depends on your situation. If you don't have cash for a down payment, there are several options available:

  • Put off buying the home and start saving until you have enough money for a down payment.
  • Get help from parents or other people you trust. Gifts can be used as down payments, as long as you can present a signed statement saying the money is a gift and not a third-party loan and can prove the source of money.
  • You may be able to withdraw up to $10,000 from a traditional, SIMPLE, or Roth individual retirement account (IRA) without penalty. Generally, if you're under 59 and a half years old, you would have to pay a 10 percent tax penalty on early withdrawals. However, if the money is used to buy, build, or rebuild a first home, the penalty may be waived.

    Warning: Think twice before using retirement savings on your down payment. The biggest benefit of saving in an IRA is the tax-free growth of investment earnings. If you remove the principal to fund your down payment, you’ll have less money in the retirement account to grow tax-free. Your savings will not grow as quickly.

    Tip: Roth IRAs work differently than other IRAs. Consult a trusted tax or financial advisor before making any withdrawal to see if this makes the most financial sense for you.
  • In some cases, you can borrow money to make a down payment. However, you should carefully consider that option since borrowing your down payment would increase your overall debt and your monthly payments.
  • Sometimes local non-profit or government organizations can offer you a second mortgage on special terms to replace a down payment. For eligible servicemembers or family members, VA loans do not require a down payment.


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