Other Types of Pledged Collateral

Retirement funds aren't the only source of pledged collateral you can use to offset your lack of a down payment. As Elmer Frank points out, his bank (like some other lenders) will accept nearly any type of asset (savings account, stocks, bonds, perhaps even a valuable antique automobile). If you or your parents have built up a large equity in their home, many lenders will accept that equity as pledged collateral.

If your parents (or other close relatives) would refinance their home (or other real estate), you might be able to use a blanket mortgage to buy a home with no down payment. Say your parents owe $130,000 on their home now valued at $510,000. You want to buy a property

priced around $185,000. Many mortgage lenders would loan you and your parents $315,000 so your parents could pay off their old mortgage balance of $130,000 and you could buy the property you want at a price of $185,000 ($130,000 + $185,000 = $315,000).

The lender would then record a blanket mortgage for $215,000 to cover both properties that together have a value of $695,000 ($510,000 + $185,000). You and your parents would share responsibility for making the monthly payments. You would have bought your property with no cash down and without having to pay mortgage insurance.

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