Mortgage rates are rising and it’s becoming more difficult for a prospective buyer to save up for the necessary down payment. Fortunately, there are ways around this hurdle.

What many don’t know is that they have several options for coming up with the money.

RETIREMENT SAVINGS
Most 401 (k) or Individual Retirement Accounts will allow people to borrow or withdraw money early. Doing so can be a good strategy for the home buyer. With a 401 (K), one can borrow up to $50,000 or 50 percent of the balance, whichever is less, and then repay a loan over five or more years, with interest. The added advantage is that this type of borrowing won’t count as debt when a lender is assessing a person’s qualifications for a loan. And there is also the possibility of getting better appreciation on money invested in real estate.

But, are there drawbacks from borrowing from a 401 K? There can be. For one thing, if the borrower quits or gets laid off from the job, he must repay the loan within 90 days or be subjected to penalties and taxes on the early disbursement.

GIFT MONEY
While borrowing against retirement savings is possible for people who were able to set money aside, there are many people who have little or no savings.

What many don’t know is that some loan programs allow borrowers to use gift money to make down payments. This gift money must generally come from family members, spouses, domestic partners, or even nonprofits.

THE UNORTHODOX
Some African and Caribbean cultures use the unorthodox method of forced savings known as the susu. In the susu plan, a group of people use peer pressure to compel each other to save. They pool their money and then distribute it among themselves, periodically, such as on a monthly basis.

For example, a dozen people might contribute $500 each into the pool every month for a year. In the first month, one person gets $6,000. The next month, the next person gets $6,000, and so on. At the end of the year, each person has both contributed, and received, $6,000.

There are many options out there for getting around the down payment hurdle. Ultimately, the borrower must decide what method is most suitable to his needs.