Putting Together Your Down Payment

Many people who are looking to purchase a new home qualify for a mortgage loan, but they don't have a large sum of cash to put up a down payment. We have a few ideas

Slash the budget and build up savings. Look for ways you can trim your monthly expenditures to set aside funds for a down payment. You could also decide to enroll in an automatic savings plan to automatically have a predetermined amount from your paycheck moved into savings. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay local for your family vacation.

Work more and sell things you don't need. Try to find a second job. This can be rough, but the temporary difficulty can help you get your down payment. You can also get creative about the things you can sell. Maybe you own collectibles you can put up for sale on an auction website, or quality household items for a tag or garage sale. You might also research what your investments could bring if sold.

Tap into retirement funds. Research the details of your particular plan. Many people get down payment money by withdrawing from IRAs or pulling money out of 401(k) programs. You will want to ensure you are clear about any penalties, the effect this could have on taxes, and repayment terms.

Ask for help from family members. Many homebuyers are sometimes fortunate enough to get help with their down payment help from thoughtful family members who are anxious to help them get into their first home. Your family members may be eager to help you reach the milestone of owning your first home.

Contact housing finance agencies. Provisional mortgage programs are given to homebuyers in specific circumstances, such as low income purchasers or buyers looking to renovating homes in a particular neighborhood, among others. Financing through this type of agency, you probably will be given an interest rate that is below market, down payment help and other incentives. Housing finance agencies can assist you with a lower interest rate, help with your down payment, and provide other advantages. The central goal of non-profit housing finance agencies is promoting residential ownership in specific areas.

Learn about low-down and no-down mortgages.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low and moderate-income buyers qualify for mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA aids first-time buyers and others who might not be eligible for a conventional mortgage loan on their own, by providing mortgage insurance to private lenders. Down payment amounts for FHA loans are lower than those of conventional mortgage loans, although these mortgages come with current rates of interest. The down payment may go as low as 3 percent while the closing costs may be financed in the mortgage.

• VA mortgages

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which typically offers a reasonable interest rate, no down payment, and reduced closing costs. While it's true that the mortgages don't originate from the VA, the department certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. In most cases the first mortgage is for 80% of the purchase price and the "piggyback" funds 10%. Instead of the traditional 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

• Carry-Back loans

  With a carry-back mortgage, the seller loans you part of his or her equity. In this scenario, you would borrow the largest portion of the purchase price from a traditional lender and finance the remainder with the seller. Typically, this type of second mortgage will have higher interest.

Need to talk about your down payment? Give us a call: 9043423622.