How to find money for a down payment
Ready to buy a home but wondering where to find that down payment? With the right tips and creativity, start building your savings without feeling like you’re turning your whole life upside down. Here are 10 ways to find extra money and turn that homeownership dream into reality.
Need money for a down payment?
Buying a home is like being in a circus these days. You’re juggling four flaming torches: good credit, manageable debt, stable income, and enough savings to keep it all going. Just balancing these on a regular day is a feat. But throw in the need for a down payment? That’s when you’re practically juggling chainsaws.
Worried about the credit torch? No problem. You can start by checking your free credit report summary on Credit.com (updated every 14 days!) to see how things look. This will help you spot any little credit gremlins you can kick out before they cause trouble. Maybe you’ll find a surprise bill or a forgotten credit card you left in your financial closet. Taking a few steps to improve your score can work wonders.
And if it’s the cash part that’s keeping you up at night, don’t worry — there are ways to give your down payment fund a boost without resorting to treasure-hunting on the beach with a metal detector (though to be fair, we won’t knock it until we try it). Here are a few ideas:
- Cut those daily luxuries – Yes, it sounds painful, but channeling your inner “DIY Barista” could save you hundreds.
- Side hustle like a pro – Whether freelancing, dog walking, or becoming the neighborhood “jack-of-all-trades,” a little extra income can add up fast.
- Sell those old “treasures” – Finally, admit that you won’t wear those rollerblades again, and let someone else enjoy them for a few dollars.
In the meantime, keep an eye on your finances like a hawk, and know that every little bit helps bring that down payment closer. With these minor tweaks, you’ll save for that house in no time (chainsaw juggling optional).
Here’s more . . .
10 ways to find money for a down payment
1. Move in with family
What? Heck no, you say? Well, hear us out (and let’s maybe keep this little conversation on the down low from Mom and Dad for now).
Living alone is great for privacy and, let’s be honest, getting to eat ice cream right out of the tub without judgment. But moving in with a nearby family member — if only temporarily — can be an absolute financial home run.
Think about it: that $2,500-a-month rent payment could vanish like your Wi-Fi on a Zoom call. You’ll be stacking cash faster than you’d thought possible by cutting your rent. Yes, it comes with a slight downside: your mom may insist on telling you how to fold laundry the “right” way. But hey, consider it free life advice.
While you’re in saving mode, do a little spending analysis to pinpoint other money-hungry culprits. Maybe it’s those daily lattes, weekly takeout nights, or that shockingly regular Amazon package on your doorstep. Cutting even a few expenses can free up serious cash, bringing you closer to that down payment in record time. Plus, when you’re eventually giving your folks the grand tour of your new place, you can brag about how intelligent financial moves made it all possible — just maybe leave out the ice cream habit.
So, for a short while, trade in a bit of privacy for the fast track to homeownership. It’s the ultimate cash-cow setup that could land you in your dream home quicker than you ever imagined.
While you’re in saving mode, do a little spending analysis to pinpoint other money-hungry culprits. Maybe it’s those daily lattes, weekly takeout nights, or that shockingly regular Amazon package on your doorstep. Cutting even a few expenses can free up serious cash, bringing you closer to that down payment in record time. Plus, when you’re eventually giving your folks the grand tour of your new place, you can brag about how smart financial moves made it all possible — just maybe leave out the ice cream habit.
So, for a short while, trade in a bit of privacy for the fast track to homeownership. It’s the ultimate cash-cow setup that could land you in your dream home quicker than you ever imagined.
2. Adjust tax withholdings
If you’re one of those who gets a hefty tax refund each year, it’s like giving the government an interest-free loan with your money — and where’s the fun? Instead of waiting until spring to get that one-time windfall, you can adjust your tax withholding to keep a little more cash in each paycheck.
Imagine it: a little boost each month that goes straight toward your down payment, no waiting, no wondering what you’ll get back next year.
Fill out a new W-4 form with your HR department to adjust your withholding. You might even feel like a financial wizard as you tweak those numbers to work in your favor. And yes, it might mean you won’t get that big refund check next April, but think about it: instead of splurging it all at once (we’ve all been tempted), you’re putting that cash to good use month by month, moving ever closer to your new front door.
Plus, you’ll get to keep more of your money now, which means no more standing around at the office party listening to everyone talk about what they’re doing with their tax refund. Instead, you’ll say, “I’m buying a house.”
3. Retirement funds
Did you know that some retirement accounts let you tap into those funds early to help make your first home a reality? That’s right — your hard-earned retirement money can, under certain conditions, do a little side hustle for you. However, like when you “borrowed” your sister’s car without asking, this move comes with a few rules and risks.
Each retirement account has its rules, so you’ll want to check the specifics before you start planning your future living room decor. A quick call to HR or your financial advisor can tell you if your 401(k) or IRA allows withdrawals or loans for a down payment. Typically, if you’re a first-time buyer (meaning you haven’t owned a home in at least three years), some plans let you borrow from yourself to finance part of your home purchase. Sounds great, right?
Well, before you pull out the checkbook, let’s talk about the potential downsides. Withdrawing from retirement accounts isn’t just like pulling cash from your savings — in fact, it can come with some hefty tax penalties, especially if you’re under 59 ½. With a 401(k) loan, you generally won’t face fines, but if you withdraw outright from an IRA, Uncle Sam will likely show up for his cut. Depending on your situation, you may owe both income taxes and a 10% early withdrawal penalty. That “free” down payment could cost more than you bargained for.
Beyond taxes, there’s the risk of shortchanging your future retirement. Money taken out of your retirement account doesn’t keep growing at the same rate as it would if left untouched, meaning you might need to work longer or save more later to make up for it.
In short, if you’re eyeing that retirement fund, go in with a game plan, and make sure the benefits of buying now outweigh the costs to your future self.
So, yes, your retirement fund can potentially help you land that home. Just be careful and cautious, and remember that while you may have a fabulous new house, Future You still wants to retire somewhere sunny someday.
4. Cash-out refi
If you already own a home, congratulations!
Not only do you have a place to binge-watch your favorite shows, but you might also have a built-in ticket to buying another property through a cash-out refinance. It sounds fancy, but here’s the gist: with a cash-out refi, you pull equity from your current home and use it to help fund a new property. Fannie Mae and Freddie Mac have recently decided this approach is A-OK for homeowners looking to buy a new primary residence. So essentially, your current home could become the unexpected MVP in pursuing property #2.
Now, here’s where it gets interesting (and maybe a little risky): this is a form of leveraged debt. You’re borrowing against the value of your current home to beef up your next offer, making you a more attractive buyer in competitive markets. After all, nothing says “I’m serious about this,” like an all-cash offer or a higher down payment backed by the value of your existing property.
But before you go all-in, remember: just because you can doesn’t mean you should. A cash-out refinance typically increases your existing mortgage balance, meaning you’ll have higher monthly payments and need to pay that new, shiny mortgage on your original home. Plus, if housing values take a dive or life throws a curveball, you could end up with two mortgages that stretch your finances thinner than a slice of deli ham.
So, if you’re ready to double down on real estate, just make sure the math and long-term risk work in your favor — not just for your wallet today but for the future, too. Your current home might be willing to help you but don’t let it become a financial frenemy.
5. Sell a property
Already a homeowner with some sweet equity in the bank? Well, here’s an option that might tempt you: selling your current home to fund your next dream house. Let’s say you’ve got $150,000 of equity chilling in your cozy living room. If you sell, you can use that chunk of change as a hefty down payment on your next property. Sounds like a winning plan, right? Well, let’s put a little asterisk next to “winning” because there’s a twist.
Here’s the tricky part: this plan hinges on both homes selling (and in a coordinated dance that only makes sense to experienced real estate agents). If your buyer backs out or a financing hiccup throws things off course, you’re suddenly in real estate limbo. You may end up staring at your dream house through the window, locked out until your current home sells.
To avoid heartache — and an impromptu crash course in couch-surfing — make sure you’ve got an experienced real estate agent guiding you through the two-step shuffle. Dual transactions are a high-stakes game; knowledge is power when pulling it off. Your agent can help you structure contingency clauses, plan for “what-ifs,” and, let’s be honest, talk you off the ledge if things get hairy.
So, while this method could fast-track you to the front porch of your new place, it’s not for the faint of heart. Go in with eyes wide open, a plan B (maybe even C), and a top-notch agent by your side. After all, in the game of “house hopping,” the better your prep, the smoother the move.
6. Sell your shit personal property
Sure, it’s nice to have toys – boats, motorcycles, jet skis, that prized pinball machine you got in a fierce eBay bidding war. But let’s face it: as much as these treasures bring us joy, none provide an actual roof over our heads. So, if you’re serious about buying a home, it might be time to say goodbye to some of those big-ticket items and hello to a sweet down payment.
If you do go this route, remember that documentation is everything. Selling your motorcycle for a quick cash infusion? Keep every paper trail and receipt handy, or that cash might as well be Monopoly money when it comes time for the bank to approve your loan. If you don’t have supporting documentation, lenders might not accept that cash for your down payment – and no one wants to be the person explaining an “under the table” transaction to their mortgage lender.
And if you’re thinking, “Selling my snowmobile and my Harley sounds a bit drastic,” don’t worry. A mortgage professional can help explore options to keep your ride safely in the garage. Ask them about low or no-down-payment programs and see if you qualify for down-payment assistance. These options let you keep a few of your beloved toys and buy a house.
Of course, before you go shopping for a dream home, it’s crucial to figure out what you can comfortably afford. Overextending yourself on a mortgage is the adult equivalent of realizing you’re on the last mile of a marathon with only one shoelace. So take the time to do a financial gut check, get your documentation together, and maybe keep that jet ski on your lakefront property for summer weekends.
7. Cut unnecessary expenses
While we’re getting rid of shit unnecessary stuff . . .
Identify areas where you can reduce spending – think of it as finding those sneaky little “luxuries” that have been quietly siphoning your bank account, one cappuccino at a time. Sure, it’s nice to dine out or start the day with a frothy latte, but cutting back can be surprisingly rewarding (and easier than it sounds!).
Let’s talk about dining out. Maybe it’s time to channel your inner chef and create “gourmet” ramen dishes at home. Or turn your kitchen into a makeshift café, complete with a “special of the day” like PB&J, made with extra love. You will save a bundle and might even gain a few new skills (or at least a funny story about your first attempt at homemade sushi).
Then there’s the notorious morning coffee run. If you’re dropping $5 daily on a latte, you’re looking at nearly $1,800 a year! Invest in a coffee maker or even a French press, and enjoy your coffee in the comfort of your pajamas without the judgmental stares of baristas when you ask for “just a little more foam.”
And those subscriptions — the ones you’re pretty sure you’re using but honestly can’t remember logging into since last year? It’s time to bid adieu. Say goodbye to that premium “meditation app” (that only stressed you out because you never opened it) or the streaming service you got for that one show, which has long since ended.
When saved consistently, even a few small cutbacks can make a real difference. Each saved dollar is one step closer to that down payment – and the reward of knowing you kicked your $10-a-month subscription habit for something way better: your own front door.
8. Start a side gig
If you’re serious about saving for a down payment, it might be time to embrace the side hustle of life. Think of it as turning your spare time into a cash machine, where you are both the operator and the mascot.
Freelancing is a great option. You can pick up gigs in design, writing, or even ghostwriting Yelp reviews (kidding… mostly). Platforms like Upwork and Fiverr make it easy to showcase your talents, whether in graphic design, copywriting, or being someone who knows how to optimize a spreadsheet just right. And each invoice paid is a little closer to that front door of your dreams.
If freelance life isn’t for you, let’s talk pet sitting. Get paid to hang out with adorable dogs and cats? Yes, please. Just be ready to deal with more judgment from your furry clients than you’ve ever gotten from your boss. Who knew that a poodle could look so unimpressed with your treat choices?
Or maybe tutoring is your jam. If you know your way around calculus or can wax poetic about Shakespeare, there’s a student (or stressed-out parent) who would love your help. Plus, you’ll get to revisit the thrill of quadratic equations and Hamlet’s existential dread — you know, the fun stuff.
For those who prefer something more hands-on, consider a retail gig. It might mean some weekend shifts, but you’ll master the fine art of folding clothes like a pro and meet some interesting characters along the way (there’s nothing quite like that one customer who insists that a “25% off” sign applies to everything, including furniture).
Whatever side hustle you choose the best part is knowing that each dollar earned is closer to your down payment. So get out there, embrace the hustle, and start banking those extra bucks.
9. Set up automatic savings
Set it and forget it: automation is the secret sauce for stress-free saving. By automatically directing a slice of every paycheck straight into a particular savings account just for your down payment, you’re basically putting your future house on autopilot — one less thing to worry about!
Here’s the beauty: when your savings are pre-deducted, you’re no longer tempted by those late-night online shopping sprees or the sudden craving for fancy brunch every weekend. It’s like your bank becomes that friend who kindly intercepts you before making questionable financial choices, saying, “Hey, maybe you don’t need that life-sized inflatable unicorn right now.”
And the best part? You don’t even have to think about it. With each paycheck, your account steadily grows without you lifting a finger. It’s the closest thing to “passive income” without a significant lottery win or the discovery of an unknown millionaire relative. Instead, you’re just quietly, consistently building your home fund while going about your day.
So set up that automatic transfer, sit back, and let your money work its magic. Before you know it, your down payment will build up faster than you can say, “I almost bought that on sale!”
10. Use cashback and rewards
Let’s talk cashback: a beautiful little perk that can turn everyday spending into bonus dollars for your down payment. By using credit card rewards, cashback apps, and loyalty programs, you can squeeze extra money out of your regular purchases, like groceries, gas, and even that “just one more” iced latte.
To get started, use a credit card that offers cashback on things you’re already buying. Pick a card that suits your spending style — some give rewards on groceries, others on dining, travel, or gas. The key is not to fall into the cashback trap of overspending. After all, spending $500 on a “just-because” kayak to earn $25 in rewards probably isn’t the math we aim for here.
Next, embrace cashback apps like Rakuten or Ibotta, which reward you for shopping through their platforms. With Rakuten, you earn a percentage back by clicking through their links to shop at big-name stores. And with Ibotta, you can save on groceries, household items, and more — just upload your receipts to collect cash rewards. It’s like getting a bonus every time you buy cereal or dish soap; before you know it, those little bits add up.
And here’s the cherry on top: set aside your cashback earnings specifically for your down payment fund. Sure, it might be tempting to cash out and buy a fancy brunch or a new gadget, but stay strong! Those rewards can grow surprisingly fast when you stay consistent. Just remember to pay off your card balances in full each month — otherwise, that interest will gobble up your rewards faster than you can say “cashback.”
With a little strategy, you can turn every dollar spent into a step closer to homeownership, transforming your spending habits into a clever savings hack. Plus, there’s something deeply satisfying about knowing that, thanks to your wise cashback moves, each dollar saved brings you closer to unlocking the door to your place.
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