5 Top Home Down Payment Strategies That Work

5 Top Home Down Payment Strategies That Work

The dreaded down payment. Scares everyone. How in the world can I come up with the money to even buy a place? Well, if you want it bad enough then you’ll have to work for it. Let’s talk about the Top 5 home down payment strategies.

Home Down Payment Strategies

Home Down PaymentBefore I begin this list, I’m going to avoid anything that requires a loan.  You can “loan” yourself money from a 401k however (1) you must pay that back and (2) if you fail to, you will be taxed heavily on it.  I would rather give you ideas on money you can get for free or get with a bit of hustle that you can use towards your home down payment.

(1) Save

You do it the old fashion way: you save.  Saving is a highly under-rated method of saving for a home down payment.  It’s amazing what you can do when you cut out a few happy hours a month or scale back on eating out 5 days a week.  How do you start?

  • Create a budget.
  • Cut back on expenses.
  • Set a target to save each month.
  • Start saving money.

Here’s suggestions on where to save money each month.

  • Cut the chord.  This is becoming more popular.  People are ditching pricy cable TV for internet and Netflix.  When we did it, our monthly cable bill went from $200/month down to $75 just for internet.  Add $9 for Netflix and we are still saving $115/month.
  • Happy Hours are now once a month instead of once a week.
  • Eat out once or twice a month instead of once or twice a week.
  • Carpool.  Everyone is going green.  No one will rib you if you carpool with someone else.  Take your monthly gasoline bill and cut it in half.  Put that money towards your down payment.
  • Do not buy the latest iGadget when they are released.

Need more?  Here’s 50+ different ways to save money.

The flip side of the coin is to stop spending money. The 10% coupon from Target only saves you 10% if you SPEND MONEY. Don’t spend money and you save 100%. Imagine that!  And whatever you do, don’t think that by putting your purchase on your credit card means you’re saving money.  You’re not.  Running up your credit card before escrow is a bad idea.  This is worse!

If creating a budget makes you cringe, remember that you’re purchasing a home.  At some point, you must have a budget to make sure you can maintain your investment.

Save $500/month in expenses becomes $6,000 in one year.

(2) The Family Bank

So “Uncle Bob” is feeling bad about that whole home inspection thing. Or maybe mom and dad want to help out. Someone can give you some money to put towards your home down payment. Don’t ask them for the money and then spend it on a new BMW. Treat it as a loan to be repaid. If you’ve already been pre-qualified and then you receive the money, you’ll need a signed statement from the family member saying that it is a “gift” and not a loan.

Because family can be tricky, make sure you clearly state and understand all of the terms for this type of assistance.  Get it in writing so that all parties understand and acknowledge what will happen.

True Story:  I was working on the listing side of a transaction.  The buyers, a nice, young couple, put down an offer on the house.  A large portion of their downpayment was coming from “Uncle Bob”.  Uncle Bob still had the money and would only give the couple the funds after their offer was accepted and after he had previewed the house.  Trying to get Uncle Bob to commit proved to be a challenge and eventually the couple lost out on the house.

Just so you know, there are limits as to how much a family member can “gift” you before you have to record the money as taxable income.  As of January 1, 2013 that limit was set at $14,000.  The only other way around that would be to put the family members name on the title as part owner in the house which you probably won’t want to do.

(3) Increase your income

You’ve already scaled back on your expenses, thanks to your income.  You’re now saving more towards your dream home.  The other side of your budget is your current income.

Here’s a list of ways you can boost your income.

  • Ask for a raise
  • Apply for a promotion (and get it)
  • Get a 2nd job
  • Start a side business
  • Do consulting work
  • Get a roommate

From the list above, I wouldn’t pick which ones to do.  I would do them all.

Ask for a raise & apply for a promotion.  You’re working pretty much 9-5 every day.  Start focusing on what you can do to add value, increase your worth and get that raise.  Start checking the internal job boards and see if there are any other positions you can apply for that will bring a promotion and a pay raise.  Not sure how to do this?  Check out Ramit Sethi’s guide on going after a pay raise.

Getting a second job to help save for a home down payment is something some people sneer at. Other’s embrace it.  Why?  Remember the goal is to get money towards a down payment.  The more money you can save, the better off you’ll be.  Even if you only make an extra $100/month, that’s $400 in one month which becomes $4,800 at the end of the year.  Uber or Lyft are viable options to consider.

Start a side business.  Forget all the time spent on coming up with a website, social media presence, and all that other stuff.  Start selling a product, ebook.  Creating a class that teaches someone how to do something is big money on sites like Udemy.com.  Don’t think you have any skills?  Baby-sitters are getting $12.50 an hour while pet-sitters are getting $11.00/hour.

Start a Consulting Business.  If you have any skills or specialized training, people will pay you for that.  They may not be able to provide you with a full time job.  However the few hours a week you can work for them might save them days of frustration on their part.  Make sure to remember that if you’re consulting, you’re responsible for paying all of your medical, taxes, etc. in your hourly rate.  Make sure to charge accordingly.  Like $75-$125/hour, depending on your skillset.  Register and bid on sites like Upwork, Guru.com or even Fiverr. This can go a long way to help save for your home down payment.

Get a roommate.  If you booted your old roommate because you got tired of stinking clothes laying around, consider getting a replacement.  That extra $500 to $700/month you get from your roommate is something you don’t have to lift a finger to get.  This lady made over $40,000 in two years by getting roommates.  Keep in mind that this is temporary.  You don’t have to have a roommate for life.

Focus on increasing your salaried income by $5,000 per year.

An extra $400/month in side jobs becomes $4,800 in one year.

A roommate paying $500/month becomes $6,000 in one year.

(4) Sell stuff

Your stuff. You know what boat stands for? Bust out another thousand. Sell that thing and use the money towards your down payment.  Again, use Craigslist.org or eBay to move your product.

selling onlineCruise garage sales, find unique stuff, and sell it on eBay.  People start businesses on eBay all the time.  Especially if you’re passionate about a particular hobby or sport.  Put that knowledge to good use and start leveraging that to make money.  Remember to set goals for doing this.  If you’re taking 100 hours to make $100 then it’s not worth your time.

Craigslist is another popular website for people to build a profitable business.  It doesn’t cost anything to browse, contact people or even post items for sale.

An extra $400/month in sales becomes $4,800 in on year towards your home down payment.

(5) Down Payment Assistance Programs

Do you qualify? Tell your agent you need a lender who is fluent in these programs. You need to make sure that you understand how the program works. Most of the time, it’s in the form of a loan whereby the interest is forgiven if you make your mortgage payments every month. Don’t get your hopes up for this one though. The restrictions on these programs are pretty tight.

Personally I would recommend that you stay away from any kind of program that offers a loan to help get you into a home.  If you feel that is your only option then certainly explore it.


Obviously there’s way more than 5 ideas in this article on how to save for a home down payment.  In this article, I presented ideas that would provide you with $40,600 towards your down payment.  There’s nothing outlandish, crazy or impossible in any of the ideas presented.  It will require effort, hard-work and brain power on your part.  But it is possible any, more importantly, other people have done it.  If they can do it, so can you.

Your ultimate goal is to cover your expenses to get your dream home into escrow.  Before you spend $1, ask yourself “Is this getting me closer to my dream home?”  The answer will tell you if you’re moving in that direction.

What are some ideas you have about getting money together for a home down payment?

By | 2016-06-06T04:24:25+00:00 June 6th, 2016|Home Buyer|0 Comments

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