It can be hard to ask others for financial assistance under any circumstance. Some people don’t want to come across as a moocher. Others just don’t want to indebted to another.
While it is preferable to buy a home on your own, there are several sensible ways to get support if needed. Such options include: turning to a family member, finding a reasonable loan on a peer-to-peer lending site, or simply asking others to support your saving and budgeting efforts.
Ask a Family Member. They Want What’s Best for You.
We know this can be awkward. If you ask a family member (like your mom or dad) for financial help, it may submit you to their conditions (which can lead to family drama). However, under the right circumstances and if both parties are willing, there are three good options in receiving financial aid from a family member, according to U.S. News:
1) Gifting a Down Payment
Most mortgage lenders allow this for a portion of the down payment. This gives the family member the least amount of liability compared to the other options.
The family member can gift $14,000 without any extra tax paperwork. Plus, there is a loophole which allows both partners of a married couple to gift $14,000 to their child and their child’s spouse, totaling $56,000 in gifted money.
2) Family Loan
If a family member has enough cash to loan to you, then you can choose this route instead of a traditional mortgage.
Though, it is important to remember that family loans must adhere to the IRS’s set interest rates based on the terms of the loan. Your family member may choose to forgive $14,000-$28,000 of interest.
3) Cosigning a Mortgage
This would only be a good option if your income is too low or your credit is too poor to qualify for a loan.
Doing this means liability for your family member that could affect his or her future real estate dreams, especially if you miss a mortgage payment.
Use a Peer-to-Peer Lending Website to Find a Cost-Effective Personal Loan.
According to Crowd Crux, these websites have emerged since 2005 as an excellent alternative to a traditional mortgage. You can find low-interest loans on these websites from lenders who benefit from your payments.
Certain risks may develop as these websites lower the standards for these defaulted loans to accept people with lower income and poor credit. However, the business of peer-to-peer lending websites is currently flourishing.
Ask People to Support Your Saving and Budgeting Efforts.
If you really don’t want to ask for any financial support, you can at least ask for moral support. Let everyone you know about your goal to buy a home, and it will become easier to save. Set your budget, and let others know what it is. Don’t succumb to pressure to blow money on the weekend with your friends or family.
Sometimes support is what we need to make the next step in saving for a home. Do what you have to in order to accomplish your goal.
If you’re new to our SAVING FOR A NEW HOME blog series, be sure to catch up with Part 1, Part 2, Part 3, and Part 4.