Building Your Down Payment

Lots of buyers qualify for various loan programs, but they can't afford a large down payment. Do you want to buy a new home, but don't know how to put together your down payment?

Reduce expenses and save. Look for ways to reduce your monthly expenses to save toward a down payment. There are bank programs through which some of your paycheck is automatically transferred into a savings account each pay period. You might look into some big expenses in your budget that you can do without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or stay close to home for your annual vacation.

Work more and sell items you don't need. Look for an additional job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can put together a comprehensive inventory of items you may be able to sell. Unused gold jewelry can be sold at local jewelers. A closetful of small items might add up to a nice sum at a garage or tag sale. You can also look into what any investments you hold may sell for.

Tap into your retirement funds. Research the details for your individual plan. It is possible to take out funds from a 401(k) for you down payment or make a withdrawal from an IRA. Make sure to learn about the tax consequences, repayment terms, and penalties for withdrawing early.

Ask for assistance from generous members of your family. Many buyers are sometimes fortunate enough to get help with their down payment assistance from thoughtful family members who are anxious to help get them in their own home. Your family members may be willing to help you reach the goal of owning your own home.

Research housing finance agencies. Special mortgage programs are given to buyers in specific situations, such as low income buyers or homebuyers planning to renovating homes in a certain place, among others. With the help of a housing finance agency, you may get a below market interest rate, down payment help and other incentives. Housing finance agencies may assist you with a reduced rate of interest, get you your down payment, and offer other advantages. The main mission of non-profit housing finance agencies is build up residence ownership in targeted parts of the city.

Research no-down and low-down mortgage loans.

  • FHA loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in assisting low and moderate-income individuals get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting mortgages. FHA provides mortgage insurance to private lenders, enabling homebuyers who might not qualify for a conventional mortgage, to get home financing. Interest rates for an FHA mortgage typically feature the market interest rate, while the down payment for an FHA mortgage will be less than those of conventional loans. The down payment can be as low as 3 percent while the closing costs might 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 fixed rate of interest, no down payment, and limited closing costs. Although the VA doesn't actually finance the mortgages, 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. Usually the first mortgage is for 80% of the purchase amount and the "piggyback" is for 10%. Rather than the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" mortgage, the seller commits to loan you part of his own equity to help you get your down payment funds. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lending institution and finance the remainder with the seller. Often, this kind of second mortgage will have a higher rate of interest.

No matter your method of pulling together your down payment, the satisfaction of living in your own home will be just as sweet!

Want to discuss down payment options? Call us at (334) 285-8850.

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