{"id":369307,"date":"2016-04-04T10:47:20","date_gmt":"2016-04-04T15:47:20","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/realestate\/mortgages-equity-loans\/finding-a-home-loan-down-payment.html"},"modified":"2024-06-09T03:03:41","modified_gmt":"2024-06-09T08:03:41","slug":"finding-a-home-loan-down-payment","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/realestate\/mortgages-equity-loans\/finding-a-home-loan-down-payment.html","title":{"rendered":"How To Afford a Home Loan Down Payment"},"content":{"rendered":"\n
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How To Afford a Home Loan Down Payment<\/h1>\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Robert Rafii, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

When buying a house, coming up with a down payment for a home loan can be difficult. Using home equity from another property isn’t helpful for first-time homebuyers. If you don’t own real estate, it’s much harder to come up with money to meet the down payment requirements for a conventional loan.<\/p>\r\n

Most lenders require a minimum down payment that ranges between 5% and 20%, which adds up to quite a chunk of change. The lower your down payment, the fewer your mortgage loan options. Your monthly mortgage payment, mortgage rate, and closing costs could also be higher.<\/p>\r\n

Here are some ways a cash-strapped buyer, especially a first-time homebuyer, can accumulate enough money for an upfront down payment on a home.<\/p>\r\n

Use Money From Your Individual Retirement Account (IRA)<\/b><\/h3>\r\n

The IRS allows first-time homebuyers to use money in an IRA account <\/a>to purchase a house. A first-time buyer is a person who has not owned a principal residence during the previous two years. The account holder, a spouse, children, grandchildren, or a parent can use up to $10,000 toward a down payment.<\/p>\r\n

If married, each spouse can take up to $10,000 from their IRA account. The $10,000 is a lifetime limit that the borrower must use within 120 days of the withdrawal. These limits are subject to change, and there can be tax penalties for excessive borrowing from a retirement account. Make sure you consult with an accountant before you touch your IRA.<\/p>\r\n

Borrow From Your 401(k)<\/b><\/h3>\r\n

Many companies’ 401(k) plans <\/a>allow employees to borrow from the plan. Each plan has different terms, but the IRS prohibits a loan from exceeding 50% of the vested value of the balance or more than $50,000. Make sure to check with an accountant first so you can avoid any potential tax penalties.<\/p>\r\n

As long as the repayment of a loan and interest occurs within a "reasonable" time, the employer may determine the:<\/p>\r\n