How to Come Up With a Down Payment

Not long ago, no-down-payment loans were big for homebuyers. But now that lenders have tightened their standards, borrowers once again are expected to pony up some cash of their own for a down payment.

Many homebuyers have difficulty coming up with a down payment. Here are some ways to do it:

• Set up an automatic saving plan.
• Get a gift from your parents, grandparents, other relatives or friends.
• Sell a car, boat, motorcycle, collectibles or other assets.
• Liquidate stocks, mutual funds, savings bonds or other investments.
• Allocate your income tax refund.
• Take a loan from your 401(k) retirement plan and repay yourself with interest.
• Withdraw funds from your 401(k) plan, subject to taxes and penalties.
• Collect on a loan that you made to someone else.
• Get a bonus from your employer.
• Explore homebuyer programs for public servants if you qualify.
• Apply for a state or local government down-payment program.
• Use a private down-payment assistance program.

Lenders need to know how you obtained the funds and that you've had control of those funds for at least several months.

Gifts and seller's concessions are acceptable, up to the percentage allowed by the loan program, but borrowed money can't be used as a down payment, as it is debt that has to be repaid.

Two government-run programs are designed to aid homebuyers who haven't saved much for a down payment. The Federal Housing Administration offers mortgage insurance that allows qualified buyers to purchase a home with a 3% down payment, all of which may be a gift. The U.S. Department of Veterans Affairs offers a home-loan guarantee program that helps military veterans buy homes with no down payments.

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