Building Your Down Payment

Lots of folks who are looking to purchase a new home can easily qualify for various loan programs, but they don't have much to put up the standard down payment. Here are a few straightforward ways to put together a down payment

Tighten your belt and save. Be on the look-out for ways to trim your monthly expenditures to save toward a down payment. There are bank programs through which a specific portion of your paycheck is automatically placed into savings each pay period. You could look into some big expenses in your budget that you can live without, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your family vacation.

Sell things you do not really need and get a second job. Perhaps you can find an additional job and build up your earnings. You can also get creative about the items you may be able to sell. Multiple small items might add up to a fair amount at a garage or tag sale. Also, you might want to think about selling any investments you hold.

Borrow from your retirement funds. Explore the details of your individual plan. Many homebuyers get down payment money from withdrawing what they need from their Individual Retirement Accounts or borrowing from their 401(k) programs. Make sure you know about any penalties, the effect this may have on your taxes, and repayment obligation.

Ask for a generous gift from your family. First-time homebuyers somtimes receive down payment help from giving parents and other family members who are prepared to help get them in their own home. Your family members may be eager to help you reach the milestone of buying your first home.

Contact housing finance agencies. These agencies provide special mortgage programs for moderate and low income borrowers, buyers with an interest in remodeling a residence within a targeted area, and additional particular types of buyers as defined by the agency. Financing through this kind of agency, you probably will receive an interest rate that is below market, down payment help and other perks. Housing finance agencies can help eligible buyers with a reduced rate of interest, help with your down payment, and provide other advantages. These non-profit agencies to boost the value of homes in specific neighborhoods.

Research no-down and low-down mortgage loans.

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in helping low to moderate-income individuals get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time buyers and others who might not be able to qualify for a typical mortgage on their own, by offering mortgage insurance to the lenders. Down payment amounts for FHA mortgages are lower than those for traditional mortgages, although these loans have current interest rates. Closing costs can be included in the mortgage, while the down payment could be as low as 3% of the purchase price.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This special loan requires no down payment, has limited closing costs, and offers a competitive interest rate. While the VA doesn't finance the mortgages, it does certify eligibility to qualify for a VA loan.

  • Piggy-back loans

    You may fund a down payment through a second mortgage that closes along with the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, instead of come up with the typical 20% down payment.

  • Carry-Back loans

    In a "carry back" situation, the seller commits to lend you some of his home equity to help you get your down payment funds. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically, this kind of second mortgage will have higher interest.

The satisfaction will be the same, no matter how you manage to pull together the down payment. Your new home will be your reward!

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

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