Southern California Real Estate Agent

Step 2: Affording the Down Payment

Is 20% Down Required?

It depends. Save money for your down payment, and remember that you have options! The down payment is how much money you pay from your own savings toward the purchase price. A traditional down payment is still 20%. Today though, down payments can be as little as 0%. As your agent I have a Business degree from the University of Southern California and financial experience to help you with your finances. I can help you find the best down payment option.

Besides the down payment, there are closing costs to transact the loan, title, escrow, inspection and other costs. Usually the closing costs run anywhere between 4-8% of the purchase price. If you have a solid down payment you receive the most options on your loan. A solid down payment amount depends on your credit score and the type of property you are looking for with a range typically between 10-40% of the purchase price, unless the deal is small in which case the seller may request all cash. I can help you locate the best financing options.

Avoid the new car!

Whatever you do, do not buy that car! Wait until after you buy the home first. Many people have lost their home loan for a car. You can always find transportation, but not everyone can buy a home. Stay focused! Car dealers are not as strict as home lenders when it comes to loan qualifications so you should wait for that car.

Boost Your Savings.

Here are six ways to maximize your down payment savings:

1. Have your parents give you a money gift. Currently, 5% of the sales price must be your own money, but there may be some creative ways for your parents or relatives to give and be tax exempt up to a certain dollar figure, see your tax advisor for advice.
2. Take money out of your 401K or insurance policy.
3. Sell something or borrow against an asset. You can sell your car for example, jewelry, or have valuables put up for collateral on a personal loan.
4. Ask the seller to pay for the nonrecurring closing costs or a portion thereof. I can help you with this when we make the offer if necessary.
5. Ask for seller financing. The seller carries a note and you pay the seller. Rarely will a seller be willing to do this, because they usually want the money up front.
6. Consider different loan programs. There are thousands to choose from. A good agent can help you locate an excellent program that matches your needs.

© John-Robin Middlebrook. Last updated July 2006.