Building Your Down Payment

Lots of borrowers can qualify for various loan programs, but they don't have much to put up the standard down payment. Start here

Tighten your belt and save. Be on the look-out for ways you can reduce your monthly expenses to save toward a down payment. Also, you can look into bank programs through which some of your take-home pay is automatically deposited into savings each pay period. You could look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or skip a vacation.

Work a second job and sell things you do not need. Maybe you can get a second job and build up your earnings. You can also get serious about the possessions you actually need and the items you can sell. Multiple small items can add up to a fair amount at a garage or tag sale. You might also research what your investments may bring if sold.

Borrow from retirement funds. Research the details for your particular plan. Many homebuyers get down payment money by withdrawing what they need from Individual Retirement Accounts or borrowing from their 401(k) programs. Make sure you understand the tax consequences, repayment terms, and possible penalties for withdrawing early.

Ask for assistance from generous family members. Many homebuyers somtimes receive help with their down payment assistance from giving family members who may be eager to help get them in their own home. Your family members may be happy at the chance to help you reach the milestone of buying your first home.

Research housing finance agencies. Provisional mortgage programs are extended to homebuyers in certain circumstances, like low income purchasers or future homeowners looking to improve homes in a targeted place, among others. With the help of this kind of agency, you probably will receive a below market interest rate, down payment help and other incentives. These types of agencies can help eligible homebuyers with a reduced rate of interest, help with your down payment, and offer other advantages. The main goal of not-for-profit housing finance agencies is to promote the purchase of homes in specific places.

Research no-down and low-down mortgages.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in helping low and moderate-income Americans qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time buyers and others who may not be eligible for a typical mortgage by themselves, by offering mortgage insurance to lenders. Interest rates with an FHA loan normally feature the current interest rate, while the down payment amounts for an FHA mortgage are below those of conventional loans. The required down payment can be as low as three percent while the closing costs could be financed in the mortgage loan.

• VA mortgages

  VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can qualify for a VA loan, which usually offers a low rate of interest, no down payment, and minimal closing costs. While 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 at the same time as the first. Generally the first mortgage covers 80% of the purchase price and the "piggyback" is for 10%. The borrower covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller commits to loan you some of his own equity to assist you with your down payment money. The buyer funds the highest percentage of the purchase price through a traditional mortgage program and borrows the remaining funds from the seller. Usually you will pay a slightly higher interest rate with the loan from the seller.

Want to discuss down payment options? Call us: 9043423622.