The current economic crisis has made getting a home loan a lot more difficult. Credit has tightened, and banks are requiring that potential homebuyers put more skin in the game. One of the ways that banks are doing this is by requiring larger down payments from home buyers.
Too many home buyers bought homes with little to no down payments during the home buying boom. Today, banks are asking homeowners to put down 10-20% of the home's buying price. This may come as a surprise to many new home buyers. Don't worry! Here are six ways to come up with your home down payment.

  1. FHA programs
    The FHA has programs that will benefit state employees who choose careers that fill a void. Teachers, law enforcement officers, firefighters and medical technicians are eligible for discounts on home ownership. The Department of Housing and Urban Development offers a Good Neighbor Next Door program that will allow state workers to buy a home for 50% off of the list price. All homeowners need to do is live in the house for three years to be eligible for the discount. The house must be their sole residence. That's a pretty good perk for working in a respectable profession.
  2. State Programs
    The FHA doesn't have the market cornered on assistance programs to new homeowners. States have programs to make home ownership more affordable to lower income and moderate income buyers. For example, the state of Georgia has the Georgia Dream House Ownership program which offers assistance to lower income borrowers. States like Ohio offer down payment assistance grants for new graduates, which will fund you 2.5% of the home's purchase price. Many states have similar programs.
  1. Retirement Plans
    One of the few occasions when it acceptable to take a withdrawal from your retirement plan is when you are buying a home. You can use up to $10,000 in funds for your first home purchase from your IRA, penalty free. Taking the money out of your 401(k), on the other hand, is a bit trickier. You can take a hardship withdrawal, but you will pay taxes on the amount that you withdraw and pay a 10% penalty. You can take a loan out from your 401(k) but you will have to repay the loan with interest. (To learn more, see Can My Spouse And I Use Our IRAs To Purchase Our First Home?)
  2. Extra Income
    Taking a part-time job is a great way to save up the money for your home down payment. Or, you could ask to work overtime at your job for a few months until you have enough saved. You could do odd jobs around your neighborhood, such as painting, pet sitting or landscaping. All of these jobs will have you on your way to homeownership in no time.
  3. Gifts
    Gifts are great, because they are a free form of money that you never have to pay back. Now is the time to hit up the Bank of Mom and Dad. Remind them of all the times that you cleaned up your room growing up and helped out around the house. This may put them in the gift giving mood. If not, see if relatives and friends want to contribute to your home buying quest. You just may find that Uncle John and others are more than happy to kick in funds to see your real estate dreams come true.
  1. Loans
    Did you fail to convince Mom and Dad to give you the down payment for free? Another option is to ask them for a loan. Write up a contract and agree to repay the amount of money that they lend you. The best part about borrowing money from your family members is that it's more convenient and they do not have to run your credit. Just make sure to repay the down payment as agreed upon. Who knows? They may even let you borrow the money interest free!

The Bottom Line
As you can tell, there are a number of alternatives that can make your home buying dream a reality. You can get help with getting in your first home by investigating all of the alternatives available to you. Good luck and happy house hunting! (For more, see Are You Ready To Buy A House?)

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