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Down Payment Gifts/Loans
A down payment loan will usually come from one of two sources,
either the buyer borrows against a retirement account such
as a 401k or will borrow from another lending institution
as a second mortgage for the down payment amount. This
will take place at the time the first mortgage is borrowed
and closed on.
If the first option is available, borrowing against ones
retirement account is probably the best option as it is a
double investment. You are investing into your retirement
account as the loan has to be repaid with interest, and also
you are investing in your new home, building equity.
If the first option is not available the second option of
taking out a second mortgage at the time of purchase is also
a good option if it is possible to borrow 20%, it will eliminate
the need for Private Mortgage insurance.
If possible gifts are also a good option for obtaining a down
payment. Many lenders now allow 100% of the down payment
to be in the form of gifts. There are even innovative
programs that allow gifts to be collected through a bridal
registry.
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