Building Your Down Payment

Lots of borrowers qualify for various loan programs, but they don't have a lot of money to put up the standard down payment. Below are a few methods that will help you put together a down payment

Slash your budget and build up savings. Look for ways you can trim your monthly expenses to put away money for a down payment. There are bank programs through which some of your paycheck is automatically placed into a savings account every pay period. You could look into some big expenses in your budget that you can do without, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay local for your annual vacation.

Work more and sell items you don't need. Maybe you can find a second job to get your down payment money. 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 garage or tag sale. You might also explore what any investments you hold could bring if sold.

Borrow money from a retirement plan. Explore the specifics of your particular plan. You may borrow funds from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, your obligation for repayment, and possible early withdrawal penalties.

Request a gift from your family. First-time homebuyers are sometimes lucky enough to get help with their down payment help from gracious family members who are eager to help them get into their own home. Your family members may be willing to help you reach the milestone of buying your first home.

Research housing finance agencies. These agencies offer provisional loan programs for moderate and low income buyers, buyers interested in rehabilitating a residence within a specific part of the city, and additional groups as defined by the agency. Working through a housing finance agency, you probably will receive a below market interest rate, down payment assistance and other incentives. Housing finance agencies can help you with a lower interest rate, get you your down payment, and offer other benefits. The primary purpose of not-for-profit housing finance agencies is to promote residential ownership in particular areas.

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

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in assisting low to moderate-income buyers qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling buyers who might not qualify for a traditional loan, to get a mortgage. Interest rates for an FHA mortgage are generally the going interest rate, but the down payment requirements with an FHA loan are smaller than those of conventional loans. Closing costs can be financed within the mortgage, and the down payment may be as low as 3 percent of the total amount.

• VA loans

  Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This particular loan requires no down payment, has limited closing costs, and provides a competitive interest rate. Although the VA does not finance the mortgages, it does certify eligibility to qualify for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close at the same time as the first. Generally the first mortgage covers 80% of the purchase price and the "piggyback" is for 10%. The borrower covers the remaining 10%, rather than come up with the usual 20% down payment.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to lend you some of his home equity to assist you with your down payment money. You would borrow the majority of the purchase price from a traditional mortgage lending institution and borrow the remainder from the seller. Generally, this type of second mortgage has higher interest.

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

Need to talk about your down payment? Give us a call: 3149139678.