Building Your Down Payment

Lots of buyers qualify for various loan programs, but they can't afford a large down payment. Here's where to get started

Tighten your belt and save. Turn your budget upside-down to discover extra money to go toward your down payment. There are bank programs in which a portion of your take-home pay is automatically transferred into a savings account every pay period. Some practical methods to save additional funds include moving into less expensive housing, and skipping a year's vacation.

Sell things you don't need and find a part-time job. Maybe you can get an additional job to get your down payment money. In addition, you can put together a comprehensive list of things you may be able to sell. Unworn gold jewelry can be sold at local jewelers. A closetful of small items could add up to a nice sum at a garage or tag sale. You could also research what any investments you have may bring if sold.

Borrow money from your retirement plan. Investigate the parameters of your retirement program. You may pull out money from a 401(k) for you down payment or withdraw from an IRA. Make sure you understand the tax ramifications, your obligation for repayment, and possible penalties for withdrawing early.

Ask for assistance from members of your family. First-time homebuyers are often lucky enough to get down payment assistance from gracious parents and other family members who are able to help them get into their first home. Your family members may be happy at the chance to help you reach the goal of owning your first home.

Learn about housing finance agencies. Provisional mortgage loans are offered to buyers in specific circumstances, like low income purchasers or future homeowners looking to improve homes in a particular place, among others. Working with this kind of agency, you may get an interest rate that is below market, down payment help and other benefits. Housing finance agencies can assist eligible buyers with a lower interest rate, get you your down payment, and provide other assistance. These non-profit programs were established to build up community in particular places.

Research no-down and low-down mortgage loans.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low and moderate-income individuals qualify for mortgage loans. Part of the United States 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 mortgage loan by themselves, by providing mortgage insurance to the private lenders. Interest rates with an FHA loan are normally the going interest rate, while the down payment requirements for an FHA mortgage are smaller than those of conventional loans. The required down payment can be as low as 3 percent while the closing costs can be covered by the mortgage.

  • VA loans

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan requires no down payment, has mimimal closing costs, and offers a competitive interest rate. Even though the mortgages don't originate from the VA, the office verfifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes along with the first. Usually the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the you borrow a portion of the seller's home equity.. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Typically you'll pay a somewhat higher interest rate with the loan financed by the seller.

No matter your method of pulling together your down payment, the thrill of reaching the goal of owning your own home will be just as sweet!

Want to discuss the best options for down payments? Give us a call at (904) 342-3622.

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