Your Down Payment

Lots of borrowers qualify for a loan, but they can't afford a large down payment. Start here

Cut expenses and save. Scrutinize the budget to uncover extra money to save for your down payment. Also, you can look into bank programs through which a specific portion of your paycheck is automatically deposited into savings every pay period. You could look into some big expenses in your spending history 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 stay close to home for your annual vacation.

Work more and sell things you do not need. Perhaps you can find a second job to get your down payment money. In addition, you can put together a comprehensive inventory of items you may be able to sell. Unworn gold jewelry can bring a good price from local jewelry stores. Multiple small things could add up to a nice sum at a garage or tag sale. You might also explore what your investments may bring if sold.

Borrow funds from a retirement plan. Research the details of your individual plan. It is possible to borrow money from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. You will want to be sure you know about any penalties, the effect this could have on taxes, and repayment obligation.

Ask for a generous gift from your family. First-time homebuyers are often fortunate enough to get down payment help from thoughtful parents and other family members who may be able to help get them in their own home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.

Learn about housing finance agencies. Provisional mortgage programs are given to homebuyers in specific situations, like low income homebuyers or future homeowners looking to remodel homes in a specific area, among others. Financing through this type of agency, you probably will be given an interest rate that is below market, down payment help and other incentives. These types of agencies can assist eligible homebuyers with a lower interest rate, get you your down payment, and offer other benefits. These non-profit agencies to boost home ownership in particular places.

Explore no-down and low-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income buyers qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling buyers who may not be eligible for a conventional mortgage loan, to obtain home financing. Interest rates with an FHA loan usually feature the going interest rate, while the down payment for an FHA loan are lower than those of conventional loans. The required down payment can go as low as 3 percent while the closing costs might be included in the mortgage.

• VA mortgages

  VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people qualify for a VA loan, which generally offers a competitive interest rate, no down payment, and reduced closing costs. While the mortgage loans aren't actually provided by the VA, the office verfifies borrowers by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close along with the first. Usually the piggyback loan takes care of 10 percent of the home's amount, and the first mortgage covers 80 percent. The homebuyer pays the remaining 10%, rather than putting the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you a portion of his home equity to help you with your down payment money. In this scenario, you would borrow the majority of the purchase price from a traditional lender and borrow the remaining amount from the seller. Typically, this form of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter which method you use to come up with the down payment. Your brand new home will be your reward!

Need to talk about the best options for down payments? Call us: 305-967-7200.