Building Your Down Payment

Lots of buyers can qualify for various loan programs, but they don't have much to put up the standard down payment. Here's where to get started

Tighten your belt and save. Look for ways to trim your monthly expenditures to set aside money for a down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your pay automatically moved into savings. You could look into some big expenses in your budget that you can do without, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a vacation.

Work more and sell things you don't need. Maybe you can find a second job to get your down payment money. In addition, you can make an exhaustive inventory of things you may be able to sell. Unused gold jewelry can bring a good price from local jewelers. Multiple small items could add up to a fair amount at a garage or tag sale. You could also look into what any investments you hold may bring if sold.

Borrow from retirement funds. Check the provisions of your retirement plan. You can pull out funds from a 401(k) for you down payment or perform a withdrawal from an Individual Retirement Account. You will need to ensure you are clear about any penalties, the effect this could have on income taxes, and repayment terms.

Ask for assistance from generous members of your family. Many homebuyers are often fortunate enough to get help with their down payment help from thoughtful parents and other family members who are able to help get them in their own home. Your family members may be pleased to help you reach the milestone of buying your first home.

Research housing finance agencies. Special loan programs are provided to buyers in specific circumstances, like low income homebuyers or future homeowners planning to renovating homes in a certain neighborhood, among others. Working through a housing finance agency, you can be given a below market interest rate, down payment assistance and other advantages. These types of agencies can assist eligible homebuyers with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit programs were established to promote community in specific places.

Learn about low-down and no-down mortgage loans.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a vital role in assisting low to moderate-income families get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time homebuyers and others who would not be eligible for a typical loan on their own, by offering mortgage insurance to private lenders. Interest rates for an FHA loan are generally the market interest rate, while the down payment amounts for an FHA mortgage will be below those of conventional loans. The required down payment can be as low as 3 percent and the closing costs could be covered by the mortgage loan.

• VA mortgages

  VA loans are backed by the Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which typically offers a competitive rate of interest, no down payment, and limited closing costs. While it's true that the mortgage loans aren't actually issued by the VA, the department certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  You may fund your down payment through a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, while the first mortgage finances 80 percent. The homebuyer pays the remaining 10%, rather than needing to pull together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to lend you some of his home equity to assist you with your down payment funds. The buyer finances most of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Usually you will pay a slightly higher interest rate with the loan from the seller.

No matter your strategy of putting together down payment funds, the thrill of living in your own home will be just as great!

Need to talk about the best options for down payments? Call us at 4078987559.