Your Down Payment
Many folks who would like to purchase a new house can qualify for several different kinds of mortgages, but they don't have a lot of cash to put up the standard down payment. Here's where to get started
Tighten your belt and save. Look for ways you can trim your monthly expenditures to save toward a down payment. You also could enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay transferred into your savings account. You could look into some big expenses in your budget that you can give up, or reduce, at least temporarily. For example, you may move into less expensive housing, or stay local for your family vacation.
Work more and sell items you don't need. Perhaps you can get a second job and build up your earnings. You can also get creative about the items you can sell. A closetful of small things may add up to a fair amount at a garage or tag sale. Also, you can consider selling any investments you hold.
Borrow funds from your retirement plan. Investigate the provisions of your retirement plan. Many people get down payment money from withdrawing what they need from Individual Retirement Accounts or pulling funds out of their 401(k) plans. Be sure you understand the tax ramifications, your obligation for repaying the money, and any early withdrawal penalties.
Request a gift from your family. First-time buyers somtimes receive help with their down payment assistance from giving family members who are able to help get them in their first home. Your family members may be pleased at the chance to help you reach the milestone of owning your first home.
Contact housing finance agencies. Provisional mortgate loan programs are extended to buyers in specific situations, like low income buyers or future homeowners planning to remodel homes in a particular area, among others. With the help of this type of agency, you may get a below market interest rate, down payment assistance and other benefits. Housing finance agencies may assist you with a reduced rate of interest, get you your down payment, and provide other advantages. These non-profit agencies to boost the value of homes in particular places.
Explore no-down and low-down mortgages.
- FHA mortgages
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in aiding low to moderate-income Americans get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in qualifying for mortgage loans.
FHA offers mortgage insurance to private lenders, helping the buyers to become eligible for a mortgage.
Interest rates with an FHA mortgage are usually the going interest rate, but the down payment requirements with an FHA loan are less than those of conventional loans. The down payment can be as low as 3 percent while the closing costs can be covered by the mortgage loan.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan requires no down payment, has reduced closing costs, and provides the benefit of a competitive rate of interest. Although the loans are not actually financed by the VA, the department certifies borrowers by providing eligibility certificates.
- Piggy-back loans
You may finance a down payment using a second mortgage that closes at the same time as the first. Usually the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Instead of the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" mortgage, the seller commits to lend you a portion of his home equity to help you get your down payment funds. You would borrow the majority of the purchase price from a traditional lending institution and borrow the remaining amount from the seller. Usually this form of second mortgage will have a higher rate of interest.
No matter your strategy of pulling together down payment funds, the thrill of owning your own home will be just as sweet!
Need to talk about down payment options? Call us at (407) 898-7559.
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