Your Down Payment
Lots of buyers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Here's where you start
Slash your budget and build up savings. Scrutinize the budget to uncover ways you can cut expenses to save for your down payment. You could also try enrolling in an automatic savings plan at your bank to have a portion of your pay automatically deposited into a savings account. You could look into some big expenses in your spending history that you can do without, or reduce, 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 don't need. Try to find an additional job. This can be rough, but the temporary trial can help you get your down payment. You can also get creative about the items you migh be able to sell. You might own desirable items you can put up for sale at an online auction, or household goods for a garage or tag sale. Also, you might want to consider selling any investments you hold.
Borrow from your retirement funds. Explore the details for your particular plan. Some people get down payment money from withdrawing what they need from their Individual Retirement Accounts or borrowing from 401(k) programs. Make sure you understand the tax ramifications, your obligation for repayment, and any early withdrawal penalties.
Ask for assistance from generous family members. First-time homebuyers are sometimes lucky enough to get help with their down payment assistance from giving parents and other family members who are eager to help get them in their own home. Your family members may be inclined to help you reach the goal of having your first home.
Learn about housing finance agencies. These types of agencies offer special mortgage loans for moderate and low income borrowers, buyers with an interest in sprucing up a home within a targeted part of the city, and additional groups as defined by the agency. Working with this kind of agency, you probably will receive a below market interest rate, down payment assistance and other perks. Housing finance agencies may help you with a lower rate of interest, help with your down payment, and provide other assistance. The principal mission of non-profit housing finance agencies is to boost the purchase of homes in specific parts of the city.
Research no-down and low-down mortgage loans.
- 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 role in aiding low and moderate-income individuals qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgages.
FHA offers mortgage insurance to private lenders, ensuring the buyers are eligible for a mortgage.
Down payment requirements for FHA loans are less than those with typical mortgages, although these loans have current interest rates. The down payment can go as low as three percent while the closing costs could be covered by the mortgage loan.
- VA loans
Guaranteed by the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This particular loan requires no down payment, has mimimal closing costs, and provides a competitive interest rate. Even though the VA does not actually provide the mortgages, it does issue a certificate of eligibility to apply for a VA mortgage.
- Piggy-back loans
You can finance your down payment with a second mortgage that closes along with the first. Generally the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage finances 80 percent. The borrower pays the remaining 10%, instead of come up with the typical 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller agrees to lend you part of his own equity to help you get your down payment funds. In this scenario, you would finance the largest portion of the purchase price with a traditional mortgage lender and finance the remaining amount with the seller. Often, this form of second mortgage will have a higher rate of interest.
The satisfaction will be the same, no matter which approach you use to pull together your down payment. Your brand new home will be your reward!
Need to talk about the best options for down payments? Give us a call at (303) 228-2254.