Putting Together Your Down Payment

Lots of buyers qualify for a mortgage loan, 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 find extra money to save for your down payment. There are bank programs in which some of your paycheck is automatically transferred into savings each pay period. You could look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. For example, you may move into less expensive housing, or skip a family vacation.

Work a second job and sell items you do not need. Maybe you can get an additional job to get your down payment money. In addition, you can make an exhaustive list of things you can sell. Unworn gold jewelry can be sold at local jewelers. Multiple small items may add up to a nice sum at a garage or tag sale. You might also look into what any investments you own will sell for.

Borrow your down payment from your retirement plan. Explore the specifics of your individual plan. You can take out money from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Make sure you understand about any penalties, the effect this will have on your taxes, and repayment terms.

Ask for assistance from generous members of your family. Many homebuyers somtimes receive help with their down payment assistance from caring family members who may be prepared to help get them in 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 loan programs are provided to buyers in certain situations, like low income purchasers or homebuyers planning to renovating houses in a specific part of town, among others. Working with a housing finance agency, you may receive an interest rate that is below market, down payment assistance and other advantages. Housing finance agencies can help you with a reduced rate of interest, get you your down payment, and provide other assistance. These non-profit agencies to boost the value of homes in specific areas.

Learn about low-down and no-down mortgage loan programs.

  • 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 critical part in assisting low to moderate-income buyers get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who might not be eligible for a traditional mortgage loan on their own, by offering mortgage insurance to private lenders. Down payment amounts for FHA loans are below those of traditional mortgages, even though these loans hold average rates of interest. The required down payment can be as low as 3 percent while the closing costs could be packaged in the mortgage loan.

  • VA 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 interest rate. Although the VA doesn't finance the loans, it does issue a certificate of eligibility to apply for a VA loan.

  • Piggy-back loans

    You can finance your down payment using a second mortgage that closes at the same time as the first. Usually the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. The homebuyer covers the remaining 10%, instead of putting the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to loan you part of his own equity to assist you with your down payment funds. You would borrow the largest portion of the purchase price from a traditional lender and borrow the remainder from the seller. Generally, this form of second mortgage will have a higher rate of interest.

No matter how you gather down payment money, the thrill of reaching the goal of owning your own home will be just as great!

Need to talk about down payment options? Give us a call: (904) 342-3622.

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