Building Your Down Payment

Lots of buyers qualify for a mortgage loan, but they can't afford a large down payment. Do you want to buy a new home, but don't know how to get together a down payment?

Cut expenses and save. Turn your budget upside-down to uncover ways you can cut expenses to go toward your down payment. Also, you can look into bank programs in which some of your paycheck is automatically deposited into a savings account every pay period. Some effective approaches to build up funds include moving into housing that is less expensive, and staying local for your family vacation for a year or two.

Work a second job and sell items you do not need. Perhaps you can get an additional job and save your earnings. Additionally, you can put together a comprehensive list of items you can sell. Unworn gold jewelry can be sold at local jewelry stores. A closetful of small items could add up to a nice sum at a garage or tag sale. Also, you can consider selling any investments you own.

Borrow funds from your retirement plan. Check the parameters of your specific plan. You may take out money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Make sure you understand about any penalties, the effect this will have on taxes, and repayment obligation.

Ask for a generous gift from your family. Many homebuyers are sometimes lucky enough to receive help with their down payment assistance from giving parents and other family members who are willing to help them get into their own home. Your family members may be pleased to help you reach the goal of buying your own home.

Contact housing finance agencies. Provisional loan programs are extended to homebuyers in certain circumstances, like low income buyers or homebuyers looking to remodel houses in a particular place, among others. With the help of a housing finance agency, you may receive an interest rate that is below market, down payment help and other advantages. Housing finance agencies can assist you with a lower rate of interest, help with your down payment, and provide other assistance. The main goal of not-for-profit housing finance agencies is promoting the purchase of homes in certain areas.

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

• Federal Housing Administration (FHA) mortgages

  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 and moderate-income buyers qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, helping the buyers to become eligible for financing. Down payment sums for FHA mortgages are smaller than those with traditional mortgage loans, although these mortgages have average interest rates. The required down payment may go as low as 3 percent and the closing costs could be included in the mortgage.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterens and service people. This specialized loan does not require a down payment, has limited closing costs, and provides the advantage of a competitive rate of interest. Even though the mortgages aren't actually provided by the VA, the department certifies borrowers by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Usually the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. In contrast to the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to lend you a piece of his home equity to help you with your down payment money. You would borrow the largest portion of the purchase price from a traditional lending institution and borrow the remainder from the seller. Usually you'll pay a slightly higher interest rate on the loan from the seller.

No matter your strategy of putting together your down payment money, the thrill of reaching the goal of living in your own home will be just as sweet!

Want to discuss down payments? Call us: 305-967-7200.