Putting Together Your Down Payment

Many buyers qualify for several different kinds of mortgages, but they can't afford a large down payment. We have a few suggestions

Slash the budget and build up savings. Turn your budget upside-down to uncover ways you can cut expenses to go toward your down payment. There are bank programs through which some of your paycheck is automatically placed into a savings account each pay period. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or skip a vacation.

Sell items you do not really need and get a second job. Try to find a second 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. Unworn gold jewelry can be sold at local jewelers. Multiple small items could add up to a fair amount at a garage or tag sale. Also, you might want to think about selling any investments you hold.

Borrow funds from your retirement plan. Research the specifics of your individual plan. It is possible to take out money from a 401(k) for a down payment or make a withdrawal from an Individual Retirement Account. Make sure you understand about any penalties, the way this will affect on your income taxes, and repayment terms.

Request a generous gift from your family. First-time homebuyers somtimes receive help with their down payment assistance from gracious parents and other family members who may be willing to help them get into their first home. Your family members may be pleased to help you reach the milestone of owning your own home.

Contact housing finance agencies. Special mortgage loans are given to buyers in specific circumstances, such as low income purchasers or buyers planning to improve homes in a targeted part of town, among others. With the help of this kind of agency, you probably will be given a below market interest rate, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other assistance. These non-profit agencies to build up home ownership in specific neighborhoods.

Learn about low-down and no-down mortgages.

  • FHA loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in helping low to moderate-income Americans qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to get mortgage loans. FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage. Interest rates for an FHA loan usually feature the current interest rate, while the down payment amounts with an FHA loan will be below those of conventional loans. The required down payment can be as low as three percent and the closing costs can be included in the mortgage.

  • VA loans

    VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which usually offers a low interest rate, no down payment, and limited closing costs. While the VA doesn't issue the loans, it does issue a certificate of eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You may fund your down payment using a second mortgage that closes at the same time as the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. Instead of the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller agrees to loan you some of his own equity to help you get your down payment funds. The buyer funds the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically, this type of second mortgage will have a higher rate of interest.

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

Want to discuss down payments? Call us at (303) 228-2254.

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