| "I love the house, but I don't have a down payment" | | | | One thing to consider is borrowing from a 401K and |
| How many times have you thought that? Many buyers | | | | using the first time home buyer tax credit to pay back |
| are looking at houses and they think they don't have a | | | | the loan to the 401K. Most 401K plans allow the |
| down payment. Don't walk away from the house. | | | | participant to take out a loan that has to be paid back |
| There are ways you can come up with the down | | | | to the 401K. You can use this loan toward the down |
| payment. | | | | payment on the home. Then when you receive the |
| Here are 3 ways you can come up with the down | | | | first time home buyer tax credit, you can use that |
| payment. | | | | money to pay back the loan. You will have to pay |
| 1. Use money from an IRA (it doesn't have to be their | | | | interest on the loan and likely make monthly payments |
| own IRA) | | | | from your income to pay back the loan until you |
| The IRS allows a first time homebuyer to withdraw up | | | | receive the tax credit. That is why it is critical that you |
| to $10,000 from an IRA penalty free and tax free. | | | | speak with an accountant before taking the loan out |
| If your are married, each spouse can each withdraw | | | | of your 401K. |
| $10,000 penalty free, giving you $20,000 to put down | | | | You could borrow money from a relative or family |
| on the home. | | | | member and pay back that loan when you receive the |
| What if you don't have an IRA? You can ask | | | | first time home buyer tax credit. The advantage here |
| someone in your family if they have an IRA. Family | | | | is that you can repay the loan in full when you receive |
| members are allowed to give you money from their | | | | the tax credit, instead of making monthly payments. |
| IRA to use toward the down payment of a home for | | | | You should first check with your accountant to see |
| a first time home buyer. The IRS will allow the first time | | | | how much of the tax credit you will qualify for. |
| home buyer, their spouse, a child, a grandchild, a parent | | | | 3. Borrow from family |
| or other ancestor, to withdraw $10,000 from their IRA | | | | Many family members want to see you in their first |
| penalty free and apply it to the purchase of the home. | | | | home. You can ask family if they will lend you the |
| For the withdrawal, the IRS defines a first time home | | | | money for the down payment. To entice them to lend |
| buyer as "you are a first-time homebuyer if you had | | | | you the money, you need to offer them something in |
| no present interest in a main home during the 2-year | | | | return. You should offer to pay them interest and set |
| period ending on the date of acquisition of the home | | | | the amount of time it will take to pay back the loan, |
| which the distribution is being used to buy, build, or | | | | and how much you will pay them each month/quarter |
| rebuild. If you are married, your spouse must also meet | | | | year. |
| this no-ownership requirement." (from IRS publications) | | | | This loan can also be secured by the house as a |
| * | | | | second mortgage. There is no rule that states the 2nd |
| Before you withdraw funds from an IRA, make sure | | | | mortgage has to come from a bank. As long as the |
| you check with your accountant. | | | | bank is secured in 1st position at an LTV that is |
| 2. Use the First Time Home Buyer Tax credit | | | | acceptable to them, and they know where the down |
| Some states allow the tax credit to be used as the | | | | payment is coming from, they should be OK with |
| down payment for the home of a first time home | | | | making the original loan. The family member that is |
| buyer. That's great if you are in one of these states. | | | | loaning money to you is in a secure position because |
| If you are buying a house that is not in a state that | | | | their loan is secured by the house. |
| allows the first time home buyer tax credit to be used | | | | These three items should help you get you into your |
| as the down payment, there are some other ways to | | | | first home. |
| accomplish the same thing. | | | | |