Building Your Down Payment

Many buyers qualify for a mortgage loan, but they can't afford a large down payment. Want to look into getting a new home, but don't know how to get together a down payment?

Reduce expenses and save. Be on the look-out for ways to reduce your monthly expenses to put away money for a down payment. You also might enroll in an automatic savings plan at your bank to have a portion of your payroll automatically deposited into a savings account. You might look into some big expenses in your budget that you can do without, or trim, at least temporarily. For example, you might move into less expensive housing, or skip a vacation.

Sell things you don't really need and get a second job. Perhaps you can find a second job and save your earnings. You can also get serious about the possessions you actually need and the things you can sell. Maybe you have desirable items you can sell on an online auction, or household items for a garage or tag sale. You can also research what your investments will sell for.

Borrow funds from your retirement plan. Explore the details of your individual plan. Some homebuyers get down payment money by withdrawing from their Individual Retirement Accounts or getting funds out of 401(k) plans. Be sure you understand the tax consequences, repayment terms, and any early withdrawal penalties.

Ask for assistance from members of your family. Many buyers are sometimes lucky enough to get help with their down payment assistance from caring family members who are prepared to help them get into their first home. Your family members may be eager to help you reach the goal of owning your own home.

Contact housing finance agencies. Special mortgage loans are provided to homebuyers in certain circumstances, like low income homebuyers or people looking to remodel houses in a certain neighborhood, among others. Financing with this type of agency, you can be given a below market interest rate, down payment assistance and other incentives. These types of agencies may help eligible buyers with a reduced interest rate, get you your down payment, and provide other advantages. The main mission of non-profit housing finance agencies is to boost the purchase of homes in particular areas.

Explore no-down and low-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 an important part in assisting low to moderate-income individuals qualify for mortgages. An office 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 would not be eligible for a conventional mortgage on their own, by providing mortgage insurance to the lenders. Interest rates with an FHA mortgage generally feature the going interest rate, but the down payment amounts for an FHA loan will be lower than those of conventional loans. Closing costs might be covered by the mortgage, while your down payment might be as low as 3% of the total.

• VA loans

  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 offers a competitive interest rate. Even though the VA does not provide the mortgage loans, it does certify eligibility to qualify for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, instead of needing to pull together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to lend you part of his home equity to assist you with your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lender and borrow the remaining amount from the seller. Usually you'll pay a somewhat higher rate on the loan financed by the seller.

No matter how you gather your down payment money, the satisfaction of living in your own home will be just as sweet!

Want to discuss your down payment? Give us a call: 3149139678.