Everything Except the Down Payment

It's one thing to have the down payment and not qualify because of credit scores but in today's tough financial environment, it may be even more frustrating to have good credit, income and job stability without the down payment.

The 2010 NAR National Housing Pulse Survey states that 79% of respondents identified the down payment and closing costs as obstacles to homeownership.  73% express a lack of confidence in getting approved based on a concern that banks have made it too hard to qualify for a home loan.

Most buyers depend on the savings or the proceeds from the sale of a previous primary residence for the down payment.  The savvy agent can recommend some other legitimate sources such as a gift from a relative or friend that doesn't have to be repaid.

Another frequently overlooked source of down payments could be the buyer's IRA.  If neither buyer has owned a home within two years, each may withdraw $10,000 from their own IRA to be used to buy a home.  The money must be applied within 120 days from the withdrawal.  The 10% penalty normally associated with early distributions is avoided but it will be subject to income tax since it was exempt the year it was deposited into the IRA.

Full disclosure of the source of the down payment needs to be made to the lender.

Sources of Down Payment First-Time and Repeat Buyers	All Buyers	First-Time	Repeat
Savings	66%	74%	57%
Proceeds from sale of primary residence	23%	1%	42%
Gift from a relative or friend	18%	27%	8%
Sale of stocks or bonds	7%	6%	8%
401k/pension fund including a loan	7%	8%	6%
Loan from a relative or friend	6%	9%	3%
Inheritance	4%	4%	3%
Individual Retirement Account	3%	3%	3%
Equity from primary residence buyer continues to own	2%	*	3%
Loan or financial assistance from source other than employer	2%	3%	1%
Loan from financial institution other than a mortgage	1%	2%	1%
Proceeds from sale of real estate other than primary residence	2%	*	2%
Loan or financial assistance through employer	1%	1%	*
Other	4%	5%	3%
National Association  of REALTORS® Profile of Home Buyers and Sellers 2010