5 Ways to Buy Your First Home (down payment hacks)

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Coming up with down payment money can:

- Help you get a loan.

- Help you buy a home.

- Help you become a homeowner sooner.

Unfortunately, saving up a down payment can be hard.

The Struggle

According to the National Association of Realtors.

91% of first time homebuyers get a loan to buy a home.

But a home loan doesn't cover everything.

Having money for other things like:

- Your home inspection.

- Your home appraisal.

- Your closing costs.

...is also a necessary part of buying a home.

Luckily, there's many ways to come up with homebuyer money.

Ways you may not have considered.

A few years into my banking career, I remember helping this interesting guy.

He wanted to buy his first home.

And was super motivated to figure out how.

For privacy, let's call him James.

He was in his 30s.

And worked as a paralegal.

James wanted to stop paying rent.

And figure out a way to buy his first home.

Something that was 100% his.

Something he could make changes to if he wanted.

Something that would help him build long term wealth.

But James didn't know if he'd be able to get a home loan.

And didn't have much homebuyer money saved.

Down Payment Hacks

Luckily, not all home loans require a large down payment when buying a home.

But putting more money down when getting a loan and buying a home also means having a lower monthly payment.

Here's 5 ways to come up with more homebuyer money.

Let's dive in.  

1. The Programs

According to Bankrate, only 1 in 10 people use first time homebuyer programs.

(because they don't know they exist)

These programs can help with your down payment and other homebuying costs.

And there's currently over 2,000+ programs.

Many of them can be found at this website:

^{Fannie Mae search tool}

Fannie Mae works directly with the U.S. Government to make homebuying more affordable.

Most first time homebuyer programs offer an average benefit of $18,000.

2. The Retirement

Retirement accounts are another way to access homebuyer money.

According to Fidelity Investments, you can generally borrow up to 50% of the available money in a 401k retirement account to help buy a home.

Retirement account loans are repaid with interest through automatic payroll deductions.

And the interest you pay goes back into your own account.

Not all retirement accounts at work allow loans, and using a 401k loan removes invested money from the market which means you could miss out on future investment growth.

So it's important to review your retirement plan rules and weigh the pros and cons before taking out a loan.

Many retirement accounts at work and Individual Retirement Accounts (IRAs) offer ways to access money to help buy your first home.

3. The Gift Funds

Gift funds are another way to access down payment money (if it's an option).

For example:

Jessica wants to buy her first home.

She doesn't have a lot of money saved up so her dad decides to help.

He offers to give Jessica $20,000 to put towards her down payment.

Most home loan lenders would require Jessica's dad to write a letter stating the money is a gift that Jessica does not need to pay back.

According to the National Association of Realtors, 20% to 25% of first time homebuyers use gift funds to help them buy a home.

4. The Relative Sale

Family selling to family often means not needing a down payment (if it's an option).

For example:

If Jessica's dad owned a home worth $400,000.

And he decided to sell the home to Jessica for $380,000.

He's giving her a $20,000 discount.

Most home loan lenders will consider that $20,000 discount Jessica's down payment.

The discount Jessica gets from her dad on the property he's selling her is called a "gift of equity".

It's a good idea to talk with a CPA first before doing something like this.

Family selling to family sometimes means the homebuyer does not need to come up with any down payment money because they are receiving a "gift of equity" instead.

5. The One-Offs

There's several other down payment hacks to help come up with more homebuyer money.

Things like:

1. Adding a relative as a co-borrower when getting your home loan pre-approval. As a co-borrower and co-owner of your home, that relative may be willing to help you with down payment money.

2. Selling a paid off car and buying a cheaper car. Then using any saved money to help buy a home.

3. Selling gold, guns, jewelry, recreational vehicles or other collectibles. Then using any saved money to help buy a home.

One-off tactics can be a quick way to help raise more homebuying money.

The bottom line

After James applied for his home loan pre-approval.

And got the results back.

He realized he needed to pay down a few debts.

And come up with more homebuyer money to get the home loan that he wanted.

So he took a few months to pay down some debt.

Got a $10,000 credit from a first time homebuyer program.

And decided to take a small loan from his retirement account to help him buy his first home.

A few months later James moved into his new home, a neat little 2 story condo not too far from his work.

Eventually James paid off the retirement loan he took out to help him buy the home.

A few years later I saw James again.

He wanted to get another home loan to buy a house.

And decided to keep the first condo he bought and rent it out.

He figured having a renter slowly pay off his loan on the condo would be a good decision.

So he'd have more money in retirement or could help him retire early.

Coming up with money to buy your first home is often the hardest part for most people (it was for me too).

I hope these 5 ways to come up with homebuyer money is useful.

You can find more ways in my ​free homebuyer playbook here​.

That's all for today.

See you next Saturday.