Building Your Down Payment

Lots of borrowers can easily qualify for several different kinds of mortgages, but they don't have much to pay a down payment. Here are a few methods that will help you put together a down payment

Slash the budget and build up savings. Be on the look-out for ways to trim your monthly expenditures to set aside money for a down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically transferred into savings each 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 move into less expensive housing, or skip a vacation.

Work a second job and sell things you do not need. Look for an additional job. This can be exhausting, but the temporary trial can provide your down payment money. You can also seriously consider the possessions you really need and the items you migh be able to sell. Maybe you own desirable items you can put up for sale at an auction website, or household goods for a tag or garage sale. You could also explore what any investments you own will bring if sold.

Tap into your retirement funds. Research the specifics for your particular plan. Some homebuyers get down payment money by withdrawing what they need from Individual Retirement Accounts or borrowing from 401(k) plans. Be sure you understand the tax ramifications, your obligation for repayment, and possible early withdrawal penalties.

Request a generous gift from your family. First-time homebuyers somtimes receive down payment help from gracious parents and other family members who may be 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.

Contact housing finance agencies. Special loan programs are given to buyers in specific situations, such as low income buyers or future homeowners looking to renovating homes in a particular neighborhood, among others. With the help of this kind of agency, you probably will receive a below market interest rate, down payment assistance and other advantages. These kinds of agencies can assist you with a lower rate of interest, get you your down payment, and offer other assistance. These non-profit programs to promote the value of homes in certain areas.

Research no-down and low-down mortgage loans.

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in aiding low to moderate-income Americans get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in qualifying for mortgages. FHA aids first-time homebuyers and others who might not be able to qualify for a conventional mortgage loan by themselves, by offering mortgage insurance to lenders. Down payment amounts for FHA loans are below those for typical mortgage loans, although these mortgages hold current rates of interest. Closing costs can be covered by the mortgage, while the down payment could be as low as 3% of the total.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists service people and veterans. This specialized loan requires no down payment, has limited closing costs, and offers a competitive interest rate. While it's true that the mortgages aren't actually issued by the VA, the department certifies borrowers by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Generally the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage covers 80 percent. The homebuyer pays the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you part of his own equity to help you with your down payment money. The buyer funds most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually this kind of second mortgage has a higher rate of interest.

The feeling of accomplishment will be the same, no matter which approach you use to get together your down payment. Your new home will be your reward!

Need to talk about your down payment? Call us: 305-967-7200.