Building Your Down Payment

Many buyers can qualify for various loan programs, but they can't afford a large down payment. Do you want to buy a new home, but don't know how you should get together a down payment?

Slash your budget and build up savings. Scrutinize the budget to discover ways you can cut expenses to go toward your down payment. Also, you can look into bank programs in which a specific portion of your take-home pay is automatically transferred into a savings account every pay period. You would be wise to 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 might move into less expensive housing, or skip a vacation.

Sell items you do not need and get a part-time job. Maybe you can find a second job to get your down payment money. Additionally, you can make an exhaustive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelry stores. Multiple small things can add up to a nice sum at a garage or tag sale. Also, you can think about selling any investments you hold.

Borrow from your retirement funds. Explore the specifics for your individual plan. Some people get down payment money from withdrawing from their Individual Retirement Accounts or getting money out of 401(k) plans. Be sure to ask your plan representative about the tax consequences, your obligation for repayment, and any penalties for withdrawing early.

Ask for assistance from generous family members. Many buyers are often lucky enough to receive down payment assistance from caring family members who are anxious to help them get into their first home. Your family members may be eager to help you reach the milestone of having your first home.

Contact housing finance agencies. Provisional loan programs are extended to homebuyers in certain circumstances, such as low income purchasers or future homeowners planning to renovating homes in a targeted place, among others. Working with a housing finance agency, you can receive a below market interest rate, down payment help and other perks. Housing finance agencies may help eligible buyers with a lower interest rate, help with your down payment, and provide other advantages. These non-profit programs were formed to build up the value of homes in specific areas.

Learn about low-down and no-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 a vital part in aiding low and moderate-income individuals qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, enabling homebuyers who may not qualify for a traditional loan, to obtain a mortgage. Down payment amounts for FHA loans are less than those of typical mortgage loans, although these mortgages come with current interest rates. The down payment can be as low as three percent and the closing costs could be packaged in the mortgage loan.

• VA mortgage loans

  VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a reasonable fixed rate of interest, no down payment, and reduced closing costs. Even though the mortgages don't originate from the VA, the office certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close along with the first. Generally the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. Instead of the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller commits to loan you a portion of his home equity to assist you with your down payment funds. The buyer finances the majority of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Typically you will pay a slightly higher interest rate on the loan from the seller.

Want to discuss down payment options? Give us a call at 866-300-1550.