How to Secure a Sizable Down Payment

SAVANNAH, GA, Dec 08, 2010 - As a result of tightened standards by lenders, down payments have become even more important as borrowers begin the planning stages of their home purchase. With more money on the table, lenders will be quick to approve your loan, and borrowers will most likely receive the best rates as well.

"Very few zero-down loan programs exist," says Connie Ray, President/Owner of Coldwell Banker Platinum Partners. "The more money you put down to buy a home, the smaller your monthly payments will be."

What some buyers may not realize is that a down payment instantly becomes a homeowner's equity when the purchase closes, and that equity can be borrowed against with a home equity loan or line of credit, says Ray. Buyers should be sure to leave behind some reserves for emergencies. Depleting your entire savings with your down payment is a common mistake; make sure to have some cash on hand to handle the unexpected cost of any repairs and maintenance that may be required.

If you are finding it difficult to save up a sizable down payment, there are steps you can take to achieve this goal. To start, try setting up an automatic savings plan. Set up your checking account to automatically transfer a certain amount of funds over to your savings after each pay period. Weeks later, you'll be surprised by how much you have saved up.

If you have an extra car, or a boat or motorcycle you aren't using, now would be the time to sell it. Cashing in any collectibles or assets can free up quite a bit of funds to go towards your down payment for your new home. In addition, liquidating stocks, mutual funds, savings bonds or other investments can also help. Cashing in any extra assets will only add to your growing down payment sum, says Ray.

Additionally, you may qualify for a special homebuyers' program, depending on your state, adds Ray. For example, HUD's Good Neighbor Next Door program offers teachers, police officers, firefighters or other public servants extreme discounts on homes in certain neighborhoods. Buyers should contact a trusted real estate professional to discuss some of these possibilities, which are great options for those worried about the size of their down payment.

Also keep in mind that lenders may want to know how your down payment was sourced in order to ensure you can control and sustain those funds with a monthly mortgage payment in the picture. Gifts from friends or family are usually accepted up to a certain percentage, but borrowed money that is required to be repaid is not.

"Don't be discouraged if you are lacking a down payment," says Ray. "By contacting a real estate professional and also your state government, you can learn about any possible down payment programs run by state and local housing authorities to figure out the best possible option for your situation."

For more information regarding down payments or financial assistance programs, please contact Connie Ray at CFRay@ColdwellBanker.com, 912-352-1222 or Coldwell Banker Platinum Partners.