Building Your Down Payment

Many buyers qualify for a loan, but they can't afford a large down payment. Do you want to look into getting a new house, but aren't sure how to get together a down payment?

Tighten your belt and save. Look for ways to reduce your monthly expenses to save toward a down payment. You might also try enrolling in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay deposited into savings. Some effective methods to put together funds include moving into a residence that is less expensive, and staying home for your vacation for a year or two.

Work more and sell items you do not need. Maybe you can get a second job and build up your earnings. You can also get creative about the things you can put up for sale. Multiple small items may add up to a nice sum at a garage or tag sale. Also, you might want to think about selling any investments you hold.

Borrow your down payment from a retirement plan. Check the provisions of your retirement plan. Some homebuyers get down payment money from withdrawing what they need from Individual Retirement Accounts or pulling money out of 401(k) plans. Be sure you understand the tax consequences, repayment terms, and any early withdrawal penalties.

Request a gift from your family. Many buyers somtimes get down payment assistance from giving parents and other family members who may be anxious to help them get into their first home. Your family members may be happy at the chance to help you reach the goal of having your own home.

Learn about housing finance agencies. These types of agencies extend special loan programs to low and moderate-income buyers, buyers interested in sprucing up a home in a particular part of the city, and other groups as specified by each finance agency. Working through a housing finance agency, you can be given an interest rate that is below market, down payment assistance and other perks. These kinds of agencies may assist you with a lower rate of interest, get you your down payment, and provide other benefits. These non-profit agencies were formed to build up community in particular areas.

Learn about low-down and no-down mortgage loans.

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in helping low to moderate-income Americans 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 offers mortgage insurance to private lenders, ensuring the buyers are eligible for a loan. Down payment requirements for FHA mortgages are below those of conventional mortgages, although these loans come with current rates of interest. Closing costs may be covered by the mortgage, and your down payment can be as low as 3 percent of the total amount.

  • VA mortgages

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan does not require a down payment, has limited closing costs, and provides a competitive interest rate. While the VA does not issue the mortgages, it does certify eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You can finance your down payment through a second mortgage that closes with the first. In most cases the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. The borrower pays the remaining 10%, instead of come up with the usual 20% down payment.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the you borrow a portion of the seller's home equity.. You would finance the largest portion of the purchase price with a traditional lender and finance the remainder with the seller. Generally, this kind of second mortgage has higher interest.

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

Need to talk about down payments? Call us: 706-860-5514.

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