Putting Together Your Down Payment

Lots of buyers qualify for several different kinds of mortgages, but they can't afford a large down payment. Do you want to buy a new home, but aren't sure how you should put together your down payment?

Cut expenses and save. Scrutinize the budget to uncover extra money to save for your down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your payroll automatically transferred into savings. You would be wise to look into some big expenses in your spending history that you can do without, or trim, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay close to home for your family vacation.

Work more and sell things you don't need. Try to get a second job. This can be rough, but the temporary difficulty can provide your down payment money. Additionally, you can make a comprehensive list of things you can sell. Broken gold jewelry can bring a good price from local jewelers. A closetful of small items might add up to a fair amount at a garage or tag sale. Also, you might want to look into selling any investments you own.

Borrow your down payment from your retirement plan. Check the parameters of your specific program. Some people get down payment money by withdrawing what they need from Individual Retirement Accounts or borrowing from their 401(k) plans. You will need to make sure you know about any penalties, the effect this may have on taxes, and repayment obligation.

Request a gift from family. First-time buyers are sometimes lucky enough to receive help with their down payment assistance from caring parents and other family members who may be anxious to help them get into their first home. Your family members may be eager to help you reach the milestone of buying your own home.

Contact housing finance agencies. These types of agencies provide provisional loan programs for moderate and low income buyers, buyers with an interest in sprucing up a house within a specific area, and other groups as specified by each finance agency. Financing with a housing finance agency, you may be given an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a lower interest rate, get you your down payment, and provide other benefits. The primary goal of not-for-profit housing finance agencies is to promote residence ownership in particular parts of the city.

Find out about low-down and no-down mortgage loan programs.

• FHA loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in assisting low to moderate-income families get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage loan. Down payment totals for FHA loans are smaller than those of typical mortgages, although these mortgages have average interest rates. The required down payment may go as low as three percent and the closing costs may be financed in the mortgage loan.

• VA loans

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This particular loan does not require a down payment, has limited closing costs, and offers a competitive rate of interest. Although the loans aren't actually financed by the VA, the department verfifies applicants by providing eligibility certificates.

• Piggy-back loans

  You can fund a down payment using a second mortgage that closes at the same time as the first. Often the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, rather than having to pull together the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to lend you some of his own equity to help you with your down payment money. In this scenario, you would finance the majority of the purchase price with a traditional lender and borrow the remaining amount from the seller. Usually you will pay a slightly higher rate on the loan from the seller.

The satisfaction will be the same, no matter how you manage to come up with the down payment. Your new home will be well worth it!

Need to talk about down payments? Call us: 4078987559.