Buying a new home: Dealing with the down payment

7/22/2011

As the credit market has become stricter in the wake of the housing crisis, many potential home buyers are facing restrictive down payment requirements designed to control home loans.

Certain specialty loans, like Veteran's Affairs mortgages and rural USDA lending programs offer home loans with no down payment, but your eligibility is restricted to certain locales and income brackets.

Most first-time home buyers use their savings to cover a down payment, but there are other avenues if saving money is difficult. If you have money in a 401k plan, look into withdrawing funds to cover the down payment and closing costs. In some cases, there are penalties for early withdrawal, and any money withdrawn will likely become taxable, so make sure you understand the nuances of your particular plan.

If you're contributing to a 401k plan regularly, consider scaling back your deposits and instead put money into a savings account for a down payment.

Saving for the immediate costs of home ownership in the traditional sense is still the most popular method of purchase. Try keeping track of your day-to-day spending and make sacrifices whenever possible. Savings of just a few dollars here or there can add up quickly.

When purchasing a home, consider all monthly costs. If you're moving from an apartment, for instance, your utilities costs may see a significant increase.