All of the answers above are true, however there is one no one has brought up. You can also take a loan against your retirement account, if you have one, and use that for a down payment. You would want to check with your account holder, find out what they allow, and if this is even a possibility. Obtain the paperwork for the loan prior to finding a property so you can provide them to your loan agent, as they will need that information. Also if you do qualify for a tax credit, you can always utilize it to pay the loan down.
Global Funding Service Corp.
Recently (in June '09), CalHFA received more funds for First Time Home Buyers, who meet their criteria. They do have a DAP (Down Payment Assistance) for up to 3% of the Sales Price. If you're interested to see if you're qualified for the DAP, then feel free to contact me.
Direct (310) 694-3544
If you do have retirement funds that you are considering to use, then make sure to speak to your tax adviser. The last I checked, there was a limit of $10k and you had to be a first time home buyer. You would owe fed and state tax on the money that you withdrew, because you never paid tax on it when it was invested. This is a good deal considering the new tax savings you will get from home ownership. Any amount withdrawn in excess of the $10k would be penalized (approx 10% fed and 2.5% Ca) and taxed.
If you can get gift funds for the 3.5% down payment, that would work as well. Just make sure it is a gift and not a loan.
If you qualify for the federal first time home buyers tax credit, then you would be receiving an additional $8k back on your taxes. You could possibly use this money to replace the retirement funds.
If you want details on the federal first time home buyers program, let me know. I can forward to you a summary of the program.
I live in San Pedro and my office is in Torrance. If you want information on available homes in the area, please feel free to contact me.
Good luck with your upcoming purchase.
Shar pointed out one way to find the down payment money. Another way is to make a one time withdrawal from your retirement account for the down payment. Some of my clients have done this and have been told there is no penalty if the funds are being used to purchase your primary residence and you own no other home (please check with your employer and/or your plan administrator on this). Of course, if you qualify for CalVet, they are the last of the 0% down payment loans and can go up to a loan amount of approx $529,000.
Let me know you need help finding your new homes and negotiating a great deal. Dare to Dream.
Real Estate Consultant
RE/MAX Palos Verdes Realty
I'm going to assume that you are going to be looking at an FHA loan. If you don't have the down payment it can be gifted to you by a family member, your employer or a non-profit organization. Check with your loan officer to see exactly what qualifies and what documentation they would need.
Best of luck!
With Your Success in Mind,
Keller Williams Integrity First Realty