Putting Together Your Down Payment
Lots of borrowers qualify for several different kinds of mortgages, but they don't have much to pay a down payment. We have a few ideas
Slash the budget and build up savings. Scrutinize the budget to find extra money to go toward your down payment. You might also try enrolling in an automatic savings plan at your bank to automatically have a predetermined portion of your paycheck moved into your savings account. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your vacation.
Work a second job and sell items you do not need. Perhaps you can find an additional job and save your earnings. You can also get creative about the things you can put up for sale. Maybe you own desirable items you can put up for sale on an online auction, or household goods for a tag or garage sale. You could also look into what any investments you own will sell for.
Tap into your retirement funds. Research the specifics of your particular plan. Many people get down payment money by withdrawing funds from IRAs or pulling money out of 401(k) plans. You will need to ensure you understand about any penalties, the way this will affect on taxes, and repayment obligation.
Request a gift from your family. Many buyers somtimes get down payment assistance from gracious parents and other family members who are prepared to help them get into their own home. Your family members may be pleased at the chance to help you reach the milestone of owning your first home.
Learn about housing finance agencies. Provisional mortgage programs are provided to homebuyers in specific circumstances, such as low income homebuyers or buyers looking to remodel homes in a targeted neighborhood, among others. With the help of this kind of agency, you can receive a below market interest rate, down payment help and other incentives. These kinds of agencies may help you with a reduced rate of interest, get you your down payment, and offer other benefits. These non-profit programs exist to promote the value of homes in particular neighborhoods.
Explore no-down and low-down mortgage loans.
- FHA mortgage loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low to moderate-income buyers get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to get mortgage loans.
FHA offers mortgage insurance to the private lenders, enabling buyers who will not qualify for a conventional mortgage loan, to get home financing.
Interest rates for an FHA mortgage are generally the going interest rate, while the down payment with an FHA loan are lower than those of conventional loans. The down payment can go as low as 3 percent and the closing costs could be financed in the mortgage.
- VA mortgage loans
VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which usually offers a low interest rate, no down payment, and reduced closing costs. While the mortgage loans 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 closes with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase price, while the first mortgage finances 80 percent. The borrower pays the remaining 10%, rather than needing to put together the typical 20% down payment.
- Carry-Back loans
In the case of the seller "carrying back a second mortgage," the seller loans you part of his or her home equity. The buyer finances the highest percentage of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Usually you will pay a somewhat higher rate with the loan financed by the seller.
The satisfaction will be the same, no matter which strategy you use to come up with your down payment. Your new home will be your reward!
Need to talk about down payments? Give us a call: (334) 285-8850.