Are you a grandparent with an estate set up to provide inheritances to your grand kids? If you so, please keep reading this post about how to fund their retirement using a Roth IRA and them buy a house with the same money.

Most kids I know of today are not going to benefit from working for a company that pays them a pension at the end of a long company career. One way to help your grand kids with their retirement would be to help them fund a Roth IRA every year. Technically, according to the IRS anyone can give a financial gift to anyone else without being taxed as long as the amount is less than $13,000 (this is for the tax year of 2010 – and the amount can change year to year).

With this being the case and you having your eye on their retirement, you may want to give them some of the estate money that you have set aside for them now on the condition that it goes directly into their Roth IRA. Concerning their Roth IRA and the gift tax rules set up by the IRA, you can give up to the full Roth IRA contribution limits (actual limits based on their age and annual income) for their Roth IRA as long as they are eligible to make their respective full annual contribution. To be eligible to make the full contribution your grand kid will have to have a job where they make at least $5,000 taxable income annually or $6,000 if they are age 50 or over.

If you start this process early enough, say when your grand kids turn 15 or 16 and get their job, you can help them sock away a pretty sizable nest egg without any taxes due on that nestegg by the time they are eligible to pull money out tax free at age 59 1/2. In the event that your grand kid wants to buy a home and meet certain Roth IRA requirements, they can tap into their Roth IRA as a first time home buyer for up to $10,000 tax and penalty free.

For the specifics of your situation, you should check with a financial planner or tax professional to find out your options for helping your grand kids with funding their Roth IRA.

If you get to the situation where your grand kid wants to buy a home, you can also help them out with a gift for their down payment. There are a few mortgage loans programs like FHA that will allow most if not all of the down payment and closing costs for buying a home come in the form of a gift.

There are only two viable mortgage loan programs that require no down payment: the VA Mortgage and the USDA Rural Housing Development Mortgage. Sure some loan programs can be structured with down payment assistance where they can be passed off as no down payment loans, but these two are true $0 down mortgages.

These two programs are very flexible in what the allow for closing cost assistance, but they are not for everyone; here is why:

• The VA Mortgage Loan Program can only be used by qualified Veterans and unmarried spouses of a Veteran who died on active duty or as the result of a service-connected disability.
• The USDA Rural Housing Mortgage can only be used to purchase homes in designated rural areas anywhere in the US; they cannot be used to buy homes in a metropolitan area.

VA  Home Loans Explained In More Detail

• You can only get a VA mortgage from a lender who participates in the VA Mortgage Loan Program. Not all lenders offer this program. There are some quirks to it like how appraisals are ordered which keep some mortgage companies from participating in the program.
• To apply and get approved for a VA mortgage you must be able to prove your eligibility with a Certificate of Eligibility. Certificates of Eligibility can be gotten in several ways: 1. Take a copy of your DD-214 to your local VA office and apply for a certificate, 2. Complete a VA Form 26-1880 and mail it to the VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC  27120. Make sure you mail proof of your military service (a copy of your DD-214). If you need to overnight your request mail it to: VA Loan Eligibility Center, 251 N. Main Street, Winston-Salem, NC  27120. Again, make sure you send proof of your military service. 3. Request that your lender get your Certificate through the Web LGY system. If you are in the National Guard or have served in the National Guard, to be eligible for a VA loan you must have served at least 6 years.
• If you were discharged from the Armed Forces with a less than honorable discharge you will most likely not be eligible for a VA Loan.
• You can use your full Certificate of Eligibility for a VA loan if you have already had one if you have paid your original VA loan off in its entirety and you plan to live in the new property for which you intend to get the new VA mortgage. There are other cases about getting another VA mortgage around partial Certificates of Eligibility and Foreclosures. See the VA website for more information.
• 100% financing no money down mortgage
• Seller can contribute to closing costs to where the VA buyer does need any of their own money
• Up front funding must be paid or covered with the VA loan amount
• No PMI required
• Loan is assumable which means some else can take over your mortgage
• No prepayment Penalties
• Leniency afforded to Veteran who goes into default due to temporary financial difficulty.

USDA Rural Housing Mortgage In More Detail

• There is no down payment required – 100% financing
• No PMI required – no monthly mortgage insurance
• Not required to have cash reserves whereas many Fannie Mae programs require 2 months reserves
• You can have unlimited assets – many first time home buyer programs and down payment assistance programs are designed to disqualify you if you have too much money in the bank
• Anyone can apply – the USDA Rural Housing Mortgage is not just for first time home buyers
• 30 year fixed interest rate mortgages
• Property must be in a rural area: Check Property Rural Eligibility With USDA

Like we said, if you fit into either one of these home buying scenarios, these two loan programs are some of the best and most stable loan programs available in the US.

Get Down Payment Help

With all the talk about buying a home in 2009 many first time home buyers are looking at buying their first home. However, according to the National Association of Realtors®, first time home buyers typically have about 4% of the money they need to qualify for a mortgage. Most home purchases require at least 6-7% of the sales price of the home to qualify for the home loan.

With so many first time buyers short on the money they need to purchase a home we feel that it is important to spell out some ways to get some down payment help. You may be someone who needs help with coming up with money for your down payment for your first home purchase. If so keep reading.

Get Down Payment Help From The Following Sources

It does matter what type of mortgage loan program you decide to go with to buy your first home. Each loan program like: FHA home loans, Fannie Mae and Freddie Mac Conventional Mortgages, VA Loans, and USDA Rural Housing Mortgages all have slightly different guidelines for what is acceptable for where and how you get help with coming up with your down payment. Make sure you discuss this with your loan officer very carefully as you qualify for your mortgage. The following are general acceptable means for getting a down payment help.

• Funding from any Federal, State, or local municipality, or HUD approved housing counseling agency in the form of government down payment grants or other down payment assistance programs
• Get a gift from a family member or a family relative that covers 100% of your down payment and closing cost requirements. There is a particular procedure that you need to follow as you do not want to have your relative just give you the money and you plop it into your checking account. You need to track where the money comes from so work closely with your loan officer to make sure you do it according to guidelines.
• Borrow money from your 401K or IRA. Be careful here that you give yourself enough lead time to get your money if you are going to borrow it from these sources. Also, with using these sources you will have to pay the money back so there will be some impact on your debt to income ratio and your income qualification. Again, make sure this is carefully analyzed with your loan officer.
• HUD and FHA approved non profit housing agencies can provide gifts and grants.
• Money that you have in your bank account already is a great source for down payment.
• Sale of property you already own like a car or boat. Make sure to check in with your loan officer before you sell anything like this to raise money for your down payment if you are doing while trying to qualify. If you are not in a time crunch, you may want to sell your property and stick the money in your bank account ahead of time so that it is in your account for at least 60 days before you have an underwriter look at your financial documents. Large deposits must be documented and cars and boats can be tricky if you do not follow documenting this type of transaction by the book.
• You can also borrow money against property you already own such as a car or home. In this case you will have to make sure that the extra monthly payment you will have to the new loan will not prevent you from qualifying by throwing your debt to income ratios over 45%. Again, the idea is to work with your loan officer to make sure you are within guidelines if you are going to get money this way.
• You employer can give you the money in some sort of employer/employee contribution program. These programs are often tied to the company’s employee retention program where you as an employee contribute to an employee home buyer plan and the company gives you some type of matching fund. Check with your HR department about this kind of program.

VA and USDA Rural housing programs do not require a down payment for most loan scenarios so you will not have to worry about any down payment help for these programs.

Happy First Time Home Buyer Getting Down Payment Assistance

Down payment assistance programs are in important part of buying a home if you do not have enough of your own money for downpayment or closing costs. Another reason why you might want down payment assistance is because you may want to keep some of your cash that you do have in the bank for until after you move in.

You may also have your own unique reasons for why you need down payment assistance. No matter what the case, knowing what down payment assistance programs are will help you decide how to best go about getting some help. Down payment assistance comes in a variety of forms from government grants to second mortgage forgivable loans and more.

Types of Down Payment Assistance Programs

Down Payment Assistance Programs come in several varieties with numerous program specifics depending on where you seek to get your assistance. Every state has some form of home buying assistance program to help with your down payment and closing costs. Many of these programs have to be used in conjunction with the sponsoring agency’s first time home buyer mortgage program so make you sure pay attention to qualification guidelines as you more forward.

Government Sponsored Down Payment Assistance Grants

Government down payment grants are lump sums of money given to a qualified buyer for the purpose of buying a home. The grant money can typically be used to fulfill the home buyer’s mortgage loan program down payment requirement. Left over money if the down payment is paid can usually be dumped in to pay for some of the costs of closing the loan.

Grant money usually has some sort of string attached like a penalty to pay the grant back if the home buyer does not stay in their home for a preset period of time. Most down payment grant programs require the home buyer to live in the home for 3 to 5 years up to in some cases 10 years. If the home buyer fails to do this, the grant may have to repaid in full or some prorated amount based on length of time in the home.

Some grants are forgivable. This means that the money never has to be paid back. You will have to check with your loan officer and state housing authority for program specifics in your state and locality.

Second Mortgage Down Payment Loans

Some types of down payment are loans made to the home buyer in the form of a second mortgage, or second lien. These programs come in a variety of structures too. One is as an interest free loan that does not have to be paid back until the home is sold or the first mortgage is refinanced. Other types of down payment assistance programs allow for no payments for a specified period of time and range from 5-30 years for the payback period. Also interest rates for these loans are at least at market rates if not better.