Putting Together Your Down Payment

Lots of folks who are looking to buy a new home qualify for various loan programs, but they can't afford a large down payment. Want to look into getting a new home, but don't know how to put together your down payment?

Tighten your belt and save. Turn your budget upside-down to discover ways you can cut expenses to save for your down payment. You might also decide to enroll in an automatic savings plan at your bank to have a portion of your pay automatically deposited into your savings account. You might look into some big expenses in your budget that you can live without, or reduce, at least temporarily. For example, you may move into less expensive housing, or stay local for your annual vacation.

Sell items you don't need and find a part-time job. Look for an additional job. This can be rough, but the temporary trial can help you get your down payment. You can also get creative about the things you could be able to sell. A closetful of small items can add up to a nice sum at a garage or tag sale. You can also look into what your investments may bring if sold.

Borrow money from your retirement plan. Investigate the parameters of your retirement plan. You may borrow funds from a 401(k) for you down payment or get a withdrawal from an IRA. Be sure you comprehend the tax ramifications, your obligation for repaying the money, and early withdrawal penalties.

Ask for assistance from members of your family. First-time buyers somtimes get help with their down payment assistance from thoughtful parents and other family members who may be prepared to help get them in their first home. Your family members may be inclined to help you reach the milestone of having your first home.

Learn about housing finance agencies. Provisional mortgage loans are offered to homebuyers in certain situations, such as low income purchasers or homebuyers looking to improve houses in a particular part of town, among others. With the help of a housing finance agency, you probably will get an interest rate that is below market, down payment help and other incentives. Housing finance agencies may help eligible buyers with a reduced rate of interest, help with your down payment, and offer other advantages. These non-profit programs were established to build up community in certain places.

Research no-down and low-down mortgage loans.

  • FHA mortgages

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income families qualify for mortgage loans. An office 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 conventional mortgage loan on their own, by offering mortgage insurance to private lenders. Interest rates for an FHA mortgage generally feature the current interest rate, while the down payment amounts for an FHA loan will be less than those of conventional loans. The required down payment may be as low as 3 percent and the closing costs might be financed in the mortgage loan.

  • VA mortgage loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which usually offers a reasonable rate of interest, no down payment, and reduced closing costs. Although the VA doesn't actually issue the mortgage loans, it does issue a certificate of eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can finance a down payment using a second mortgage that closes along with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. The homebuyer pays the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" agreement, the seller agrees to lend you part of his home equity to help you with your down payment funds. You would finance the majority of the purchase price with a traditional mortgage lending institution and borrow the remaining amount from the seller. Typically you will pay a somewhat higher rate on the loan from the seller.

No matter how you gather your down payment funds, the satisfaction of reaching the goal of living in your own home will be just as great!

Want to discuss down payments? Give us a call at (334) 285-8850.

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