Since it’s is very rare to find 100% financing, almost everyone needs a down payment. The exceptions are; VA and USDA loans. Assuming you do not qualify for one of those, you will need at least 3.5% for a down payment, to qualify for an FHA loan. One source that some people overlook is the Roth IRA. The Roth is a retirement plan where you make after-tax contributions. Since you have already paid taxes on that money, you can withdraw the amount you contributed to use for the purchase of the home. There will be no tax penalties or fines, as long as you do not withdraw any of the gains. I will always check with my CPA to make sure your personal financial situation does not have anything unique that might cause a issue down the road.
Having the ability to use your Roth plan, may help minimize your cash assets for your purchase. You may need those cash assets for other expenses related to the purchase; furnishing, appliances, painting/floors, etc.
Another option you may look at is 401k employer plans. Some employer plans have the option to make a loan against the 401k. Most plans let you borrow up to 50% of the current value, and have a determined repayment time period. They usually charge a low interest, and that goes back into your plans. Please check on the different loans, because I know of at least 1 plan that offers 2 different loans; A personal loan and a loan for a home purchase. The loan for a home purchase offers you a longer repayment period. Also, please be aware that the amount that is being repaid will be deducted directly from your paycheck, and therefore, your income will have to be adjusted for qualifying purposes.
Sr Mortgage Broker
Fairfax County Homes
Monday, December 14, 2009
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1 comments:
Very useful information. Didn't know you can use your Roth IRA as a downpayment to purchase a house.
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