It can be quite a challenge to save up enough money to make a down payment. It pays to add a twist to the usual process of making down payments, adding some creativity to get around this difficult process.

First of all, there are two things mainly considered when determining your down payment. It depends largely on these two factors whether you’ll be paying little money down or a lot of it to own and move into the house you’ve been eyeing for quite a while.

Number one factor is your credit rating. If your credit rating is relatively high, your down payment should be lower.

The second factor would be your home’s total selling price. The total cost is another primary concern here because in essence, down payments are taken as a percentage of the home’s selling price.

Let us face it, down payments cost a lot of money. Money does not grow on trees, so a lot of first-time buyers are hard-pressed to come up with the funds. Many a prospective homeowner has waved the white flag after years of futile saving and scrimping to come up with money for a down payment. But for a lot of rookie home buyers, they have actually been saving up for down payment money without even knowing it.

Getting Creative

Did you know that you could end up borrowing from yourself? The federal government looks very favorably on home ownership. As a result, the federal government pushes the real estate market forward by introducing perks such as tax breaks and other incentives. Once such incentive is a unique little twist built into the laws controlling 401k savings plans. The tweak in these laws allows you to, well, borrow from the bank of you.

With most 401k plans, you have the right to borrow up to 50 percent of the vested amount of your account. Simply put, you can borrow up to $25,000, for instance, if the vested amount in your 401k plan totals $50,000. Now this money will be used to cover your home’s down payment. After getting into the home, you can simply pay off the 401k loan over five years or you can take out a home equity loan and repay it with that money.

You are, in effect, playing chess with the down payment and winning the game. In the end, this creative down payment funding strategy gets you over the down payment hurdle and into your home.

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