Building Your Down Payment

Lots of buyers qualify for various loan programs, but they don't have a lot of money to put up a down payment. Do you want to buy a new home, but aren't sure how to get together a down payment?

Tighten your belt and save. Look for ways you can trim your monthly expenditures to save toward a down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your payroll automatically moved into savings. You could look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay close to home for your vacation.

Work a second job and sell items you do not need. Maybe you can get a second job to get your down payment money. You can also seriously consider the possessions you actually need and the items you may be able to put up for sale. A closetful of small items can add up to a fair amount at a garage or tag sale. Also, you might want to consider selling any investments you own.

Borrow money from a retirement plan. Explore the details for your particular plan. You can pull out funds from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. You will want to be sure you understand about any penalties, the way this may affect on income taxes, and repayment obligation.

Ask for help from family members. First-time buyers are sometimes lucky enough to receive down payment assistance from gracious parents and other family members who are willing to help get them in their own home. Your family members may be inclined to help you reach the goal of having your first home.

Contact housing finance agencies. These agencies offer special loan programs to low and moderate-income borrowers, buyers interested in rehabilitating a home in a particular part of the city, and other groups as defined by each agency. Working with this type of agency, you may get an interest rate that is below market, down payment assistance and other perks. These types of agencies can help you with a reduced rate of interest, help with your down payment, and provide other assistance. The main purpose of non-profit housing finance agencies is to promote home ownership in particular areas.

Explore no-down and low-down mortgages.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in assisting low to moderate-income buyers qualify for mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to get home financing. FHA assists first-time homebuyers and others who may not be able to qualify for a conventional mortgage loan by themselves, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going interest rate, while the down payment requirements for an FHA mortgage are less than those of conventional loans. The down payment may be as low as three percent while the closing costs can be financed in the mortgage loan.

• VA mortgages

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which usually offers a competitive rate of interest, no down payment, and limited closing costs. Even though the loans don't originate from the VA, the office certifies borrowers by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close along with the first. Usually the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. In contrast to the traditional 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  We a seller carries back a second mortgage, the seller loans you part of his or her equity. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Usually you will pay a slightly higher rate with the loan financed by the seller.

No matter how you gather your down payment, the satisfaction of reaching the goal of owning your own home will be just as great!

Need to talk about the best options for down payments? Give us a call at 4078987559.