9 Smart Ways to Come Up with Down-Payment Cash

Home buyers can consider government programs, existing assets, and personal finance techniques.

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Slideshow: 9 Smart Ways to Come Up with Down-Payment Cash

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5. Tap your IRA: Certain home buyers can use funds from their IRA to cover down-payment costs without incurring the 10 percent early withdrawal penalty. Individuals who are under age 59½ and have not owned a home within the preceding two years can withdraw up to $10,000—penalty-free—from their IRA to put toward a real estate purchase. The cash can be used for acquisition, financing, or closing costs associated with the purchase. Retirement savings, however, should not be the first place you look for cash. Only take money from your IRA after exploring all alternatives. (Go here for additional details.)

6. Use your 401(k): Although would-be home buyers may be able to access cash from their 401(k) for a down payment on a principal residence, they must first demonstrate a severe financial hardship. Many financial advisers advise against withdrawing funds from your 401(k) unless you have exhausted all other options. (That's your retirement nest egg, after all.) In addition, some 401(k) plans allow participants to borrow a portion of the funds they've saved up to cover a down payment or other expenses. Plans that permit such loans typically provide access to as much as half of the vested account balance, not to exceed $50,000. But once again, home buyers should consider tapping their 401(k) for down payment cash only as a last resort. (Go here for additional details.)

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7. Savings plan: Although it might take a little time and discipline, an old-fashioned savings plan can be a great way for consumers to put together enough cash for a down payment. For assistance in creating a savings plan, consider reaching out to a certified credit counselor, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling. "To have an objective third party look at your finances and find hidden money within your budget is a super idea," Cunningham says. "They can find things which you may not have thought of." (Go here to find a certified credit counselor near you.)

8. Selling assets: Some of your down payment cash could be sitting right in front of you, Gumbinger says. "You may consider looking through all of the stuff that you have accumulated and see if there are things that you might be able to sell that you don't need," Gumbinger says. "If you have got three flat screen TVs in your apartment because they were cheap and you just started accumulating them, see if you can't get rid of some of those assets and see if they can be turned into something that's going to be more productive for you." Once you've assembled an inventory of items you would be willing to sell, consider holding a garage sale or putting them on eBay.

9. Second job: Additional income, of course, can also help would-be home buyers save enough cash for a down payment. But with the national unemployment rate at 9.5 percent, such work may be difficult to find. Still, it's worth seeing if there is any freelance work you might be able to take on, or checking with your friends who work in retail to see about any part-time openings.