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by. Kay Bell Bankrate.com
You've
found the perfect house. Interest
rates are are still low. There's
just one thing standing between you and your dream home: a
down payment.
Don't
abandon your homeownership quest just yet. Here are 10 ways to
come up with the cash for your
new
castle.
1.
Pay off your plastic.
Paying
bills is not fun, but it definitely will help in your hunt for
down-payment money. When you carry a credit card balance, the
ever-accumulating interest charges mean more of your money
goes to the card company each month. Keep that cash for
yourself by cutting your debt load. With Bankrate's payment push system, you prioritize your
debts and pay the most on the one with the highest interest
rate. Once that's paid, shift your focus to the next highest
rate and so on. You'll get the most money-sucking credit card
bills out of the way more quickly, freeing up more of your
income to go toward building your
savings.
2.
Ladder CDs to boost savings.
Once you've got a few extra
bucks, put it to work making more money for you. Many
investors prefer certificates of deposit. They are low-risk
and relatively accessible. But when interest rates are low,
the return isn't always what a saver hopes. You can maximize
the earning power of CDs by buying different certificates at
varying maturity dates. For example, instead of buying one big
CD, parcel out your money into three-month, six-month and
one-year certificates. Known as laddering, this gives you flexibility to
adjust your savings as rates change. Laddering allows you to
lock in when rates are high and when rates are not so good, the process keeps you from being stuck
for too long with low earnings.
3.
Use special programs.
There are many programs for home
buyers in down-payment distress. Borrowers in a wide range of
incomes, locales and professional groups may have access to
aid from Fannie Mae and Freddie Mac, the
government-sponsored offices that buy mortgages and package
them as investments. Various nonprofit and community groups also lend a
hand to buyers struggling to put money down on a home. And
don't forget about assistance from state
agencies.
4.
Tap your IRA.
If you're looking to buy your first home, let
the Internal Revenue Service help. Tax laws allow you to use up to $10,000 in IRA funds as a down
payment if you've never owned a house. If you're married
and you both are first-time buyers, you each can pull from
your retirement accounts, meaning a potential $20,000 down
payment. Even better is the IRS definition of first-time home
buyer. Technically, you don't have to be purchasing your very
first abode. You qualify under the tax rules as long as you
(or your spouse) did not own a principal residence at any time
during the two years prior to the purchase of the new home. In
these instances, Uncle Sam waives the penalty for early
withdrawal, but you may owe tax on the money depending on the
type of IRA. Many cash-strapped home buyers, however, find the
long-term return of investing in residential real estate is
worth the short-term tax bill.
5.
Borrow from your 401(k).
Do you have more retirement money
in a company savings plan? Consider borrowing against your 401(k) for the down
payment. There are downsides to this strategy: Unlike an
IRA home-related withdrawal, you'll have to pay back any money
you take out of your company plan. The repayment will cost you
a bit more since the account contributions were made with
pretax money, but your payback will be made with after-tax
dollars. At least the interest payments on this loan will be
going back into your 401(k).
6.
Get a gift.
Aunt
Edna always liked you best. Take advantage of that favored
family status and ask her to make a present of your down
payment. Tax law allows gifts of several thousand dollars a
year to be bestowed without tax consequences to either the
giver or recipient. The gift-exclusion amount is adjusted annually
to reflect inflation (it's $12,000
now), so check with the IRS to ensure guidelines are met. Many
wealthy people use this tax rule to reduce potentially taxable
estates while they're still around to get the thanks. Not
close to your family? Not a problem. The gift exclusion isn't
limited to relatives. The monetary present can be from anyone,
so track down a well-off friend now!
7.
Ask for a raise.
No luck finding a benefactor? Then maybe it's
time to ask your boss for more money. Just make sure
you do your homework beforehand, and base your request for a
salary increase on your accomplishments rather than your
needs.
8.
Get a second job.
OK, so you work for the original Ebenezer
Scrooge and he humbugged your raise request. Moonlighting
could help you earn the extra money. This option makes the
most sense for those who are young and not yet fully
established in their professional lives.
9.
Look for lost loot.
Around $14.5 billion worth of savings bonds is sitting around, ignored by
owners and not earning a penny of interest. Do you have any
stashed somewhere? Make sure your bonds are still adding to
your net worth. You could also have money languishing in an old bank account somewhere or deposits paid
to utilities that were never recovered.
10.
Auction off unwanted items.
You didn't find any forgotten
riches as you were digging through the attic, but there was
plenty of other junk up there. Transform it into your down
payment. Thanks to eBay and similar sites, it's never been
easier to prove that one person's trash is another's treasure.
Check out Bankrate's tips for selling in an online auction. Then
clean out the closets and log on.
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