Your Down Payment
Many borrowers can qualify for a mortgage loan, but they can't afford a large down payment. We have a few suggestions
Reduce expenses and save. Be on the look-out for ways to reduce your monthly expenditures to set aside money for a down payment. You could also decide to enroll in an automatic savings plan to automatically have a predetermined portion of your paycheck moved into savings. You could look into some big expenses in your budget that you can do without, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.
Sell things you do not need and get a part-time job. Perhaps you can get an additional job to get your down payment money. You can also seriously consider the possessions you really need and the things you could be able to put up for sale. A closetful of small items could add up to a fair amount at a garage or tag sale. You might also explore what any investments you own could bring if sold.
Borrow from your retirement funds. Investigate the provisions of your retirement program. You can borrow funds from a 401(k) for a down payment or withdraw from an Individual Retirement Account. Make sure you are clear about any penalties, the way this may affect on your income taxes, and repayment terms.
Request a gift from family. First-time homebuyers are often lucky enough to receive down payment assistance from giving family members who may be willing to help get them in their own home. Your family members may be willing to help you reach the milestone of owning your first home.
Contact housing finance agencies. These types of agencies extend special mortgage programs to low and moderate-income homebuyers, buyers interested in renovating a home in a particular part of the city, and other specific kinds of buyers as defined by each finance agency. With the help of this type of agency, you may be given a below market interest rate, down payment help and other incentives. These types of agencies can help eligible buyers with a reduced interest rate, get you your down payment, and offer other benefits. The central goal of not-for-profit housing finance agencies is to promote the purchase of homes in certain areas.
Find out about low-down and no-down mortgage loan programs.
- Federal Housing Administration (FHA) mortgages
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income buyers get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in qualifying for home financing.
FHA provides mortgage insurance to the private lenders, enabling new homebuyers who will not qualify for a conventional mortgage loan, to obtain a mortgage.
Interest rates for an FHA loan are generally the current interest rate, but the down payment amounts with an FHA loan will be less than those of conventional loans. The required down payment may be as low as three percent while the closing costs could be financed in the mortgage loan.
- VA loans
Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This specialized loan requires no down payment, has reduced closing costs, and provides a competitive interest rate. Even though the mortgages aren't actually financed by the VA, the department certifies applicants by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close along with the first. In most cases the first mortgage is for 80% of the purchase price and the "piggyback" funds 10%. The borrower covers the remaining 10%, rather than putting the typical 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller commits to loan you part of his own equity to help you with your down payment money. You would finance the largest portion of the purchase price with a traditional mortgage lender and borrow the remainder from the seller. Typically, this form of second mortgage will have a higher rate of interest.
The satisfaction will be the same, no matter which method you use to come up with the down payment. Your new home will be your reward!
Need to talk about down payments? Give us a call at (904) 342-3622.