Building Your Down Payment

Lots of buyers can qualify for a mortgage loan, but they don't have a lot of cash to pay the standard down payment. Do you want to look into getting a new home, but aren't sure how to put together a down payment?

Slash the budget and build up savings. Scrutinize your budget to discover extra money to save for your down payment. You also could enroll in an automatic savings plan to automatically have a set amount from your take-home pay moved into your savings account. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.

Sell things you don't really need and get a part-time job. Perhaps you can find an additional job to get your down payment money. You can also get creative about the items you can put up for sale. You may own collectibles you can sell on an online auction, or household items for a tag or garage sale. Also, you might want to look into selling any investments you own.

Borrow money from a retirement plan. Investigate the provisions of your particular plan. It is possible to borrow money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Be sure to ask your plan representative about the tax ramifications, repayment terms, and any early withdrawal penalties.

Request a gift from your family. First-time homebuyers are often fortunate enough to get help with their down payment assistance from thoughtful family members who are willing to help them get into their first home. Your family members may be happy at the chance to help you reach the milestone of owning your first home.

Research housing finance agencies. Special mortgate loan programs are extended to homebuyers in specific circumstances, like low income homebuyers or future homeowners planning to renovating homes in a particular part of town, among others. Financing through a housing finance agency, you may get a below market interest rate, down payment help and other perks. These kinds of agencies may help eligible homebuyers with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit programs to promote the value of homes in certain neighborhoods.

Explore no-down and low-down mortgage loans.

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income buyers qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who need to get mortgage loans. FHA assists first-time homebuyers and others who would not be able to qualify for a typical mortgage loan by themselves, by offering mortgage insurance to private lenders. Interest rates for an FHA mortgage are normally the market interest rate, while the down payment requirements with an FHA loan are less than those of conventional loans. The required down payment can go as low as 3 percent while the closing costs can be covered by the mortgage.

• VA mortgage loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which usually offers a low rate of interest, no down payment, and reduced closing costs. Although the VA doesn't provide the mortgages, it does certify eligibility to qualify for a VA mortgage.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Usually the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. The homebuyer pays the remaining 10%, instead of having to put together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you some of his own equity to assist you with your down payment money. The buyer funds the highest percentage of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Usually you'll pay a slightly higher rate with the loan financed by the seller.

The satisfaction will be the same, no matter which approach you use to get together your down payment. Your brand new home will be your reward!

Want to discuss down payments? Call us: 4357556622.