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Down payments on houses are typically 20% of the total loan amount. For people who can’t afford a down payment that large there are a few options available. One option is to get a loan from a family member or friend. Another option is to crowdfund the down payment. There are a few platforms that allow people to crowdfund such as Patreon and GoFundMe.
The advantage of crowdfunding is that it allows people to pool their resources together in order to come up with a down payment. The disadvantage is that it can take a long time to raise the money and there is no guarantee that the money will be raised.
Can I give my child money for a down payment on a house
The simple answer is yes you can gift money for a down payment on a house. You just need to make sure that you follow the rules set by the Internal Revenue Service (IRS). If you don’t you may end up owing taxes on the gifted money.
Here are some of the rules set by the IRS:
- The person who gives the gift must be a blood relative or legal spouse of the person receiving the gift.
- The maximum amount that can be gifted is $15,000 per year per person.
- The gifted money must be used for the sole purpose of buying a house.
- If the gifted money is not used within 120 days of receiving it the giver will owe taxes on it.
Should You Crowdfund Your Down Payment?
The quick answer is no. You should not crowdfund your down payment because it will put you at a disadvantage when negotiating with the seller and it can put your home purchase in jeopardy if you don’t have the funds to close.
When you’re buying a home the more money you can put down the better. A larger down payment shows the seller that you’re serious about the purchase and it will give you a lower interest rate and monthly payment. If you crowdfund your down payment you may not be able to get the best deal on your mortgage because lenders will see that you don’t have much skin in the game.
Additionally, if something happens and you can’t come up with the rest of the money needed to close you could lose your earnest money deposit and any other money that you’ve already spent on the home. It’s better to save up for a down payment
Why Does Your Down Payment Amount Matter?
When you’re buying a home the more money you put down upfront the lower your monthly mortgage payments will be. A larger down payment also means that you’ll have more equity in your home from the start which can give you a leg up if you want to sell or refinance later on.
But how much should you actually put down? That depends on several factors including your personal finances the type of mortgage you’re getting and the housing market in your area.
In general, it’s a good idea to aim for a 20% down payment—that way you won’t have to pay for private mortgage insurance (PMI) which can add several hundred dollars to your monthly mortgage payments. But in some cases, you may be able to put down less—as little as 3% depending on the type of mortgage loan you’re getting.
How Crowdfunding Your Down Payment Works?
Crowdfunding your down payment is a new way to buy a home. You can use sites like GoFundMe to solicit money from family and friends. This option can be a good fit if you have a large network and you’re comfortable asking for money. You can also crowdfund your down payment on platforms like Kickstarter.
With this option, you’ll need to offer something in return for the money you raise. For example, you could offer rewards like dinners or private tours of your new home once it’s finished.
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