Find money for a home down payment

Hand holding magnifying glass over a bill in grass

If a new home is in your future, now’s the time to think about how much you’ll need to save for a down payment and what it will take to reach your goal. If you’re worried you won’t have enough saved by the time you’re ready to buy, consider these strategies to help you find the money you need.

Review your spending plan 

Take a hard look at where your money is going now. Look for ways to save by cutting spending and putting off big purchases and vacations. Create a dedicated Share Savings Account as your house fund. Make saving effortless with an automated funds transfer. Once you’ve got some savings built up, you may want to transfer your funds to a Money Market Share Account to earn higher dividends. If your timeframe is longer than six months, you might also consider putting the funds into a Share Term Certificate to earn even more dividends.

Save windfalls and pay raises 

When you receive any tax refunds, work bonuses or pay raises, transfer them into your house fund. Set up an automatic transfer from each paycheck for any increases in pay. If your schedule allows, consider a second job and dedicate all the earnings to the house fund. This might not seem like much fun, but remember it’s only temporary until you reach your goal.

Check for forgotten and unclaimed cash 

Junk drawers or old safes may hold long forgotten savings bonds you might be able to cash in without consequence. Check the state treasurer’s department for unclaimed cash you either forgot about or are unaware exists. It may be just a few dollars or a few hundred dollars, but, every little bit helps. Be sure to add this extra money to the house fund and watch your savings grow.

Ask family for help 

Could a family member be a resource? Depending on the amount, your family may be a good option. If you do receive a gift, be sure to document the source of the funds with a gift letter from the donor. Include their name and contact information, dollar amount of the gift and funds transfer date. Be sure the letter specifies the money is a gift and you don’t have to pay it back.

Look for special programs or incentives 

First-time homebuyers often qualify for special terms and incentives. LGFCU has partnered with the Federal Home Loan Bank of Atlanta to offer up to $5,000 in down payment, closing costs and principal reduction assistance on adjustable rate mortgages (ARMs) for first-time homebuyers. To qualify for this grant, a member must contribute at least $1,000 toward the down payment or closing costs. For more information, call 888.732.8562 or visit your local branch.

Community groups like the N.C. Housing Finance Agency may be a source for down payment money, too. Websites like can connect you to other programs that may be helpful.

Your Credit Union has a First-Time Homebuyers Loan with no private mortgage insurance (PMI) needed. PMI protects a lender in case you don’t pay your mortgage. Some lenders add this insurance when you don’t have a large enough down payment. LGFCU’s First-Time Homebuyers ARM Loan comes with no down payment required. If this is your first time or you’ve not owned a home in the past three years, you may qualify for financing up to 100 percent of the purchase price. You may also be eligible for an extra $2,000 in financing to help with closing costs.

Use your IRA or 401(k)

If you qualify as a first-time buyer, you can withdraw up to $10,000 penalty-free from your Individual Retirement Account (IRA) to use toward buying a home. Keep in mind you’ll face income taxes on the amount withdrawn and you’ll reduce your retirement nest egg.

Another option is to borrow from your 401(k) plan. Check with your human resources representative or plan administrator to confirm if loans are available and identify your options. You could end up facing income taxes and penalties on outstanding balances if you don’t repay the loan within five years or if you get a new job before you repay the loan.

While tapping into your IRA or 401(k) plan are options, they should be last on your list. In both cases you end up with less income during retirement. You cannot replace the money withdrawn from an IRA and most 401(k) plans do not allow you to contribute while you have an outstanding loan. You’ll want to weigh the pros and cons before moving forward.

Let your Credit Union be a resource. When you’re ready to buy a home check out LGFCU’s mortgage rates to learn more.

The advice given is for informational purposes only. Consult your Credit Union for additional guidance. 

Share this article: