Putting Together Your Down Payment
Many people who would like to purchase a new home can qualify for various loan programs, but they don't have a lot of cash to pay the standard down payment. Here are a few ways to get together a down payment
Tighten your belt and save. Be on the look-out for ways you can trim your expenditures to save toward a down payment. Also, you can look into bank programs in which some of your paycheck is automatically transferred into a savings account each pay period. You might look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or stay close to home for your vacation.
Sell items you don't need and get a second job. Try to get a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the items you may be able to sell. Maybe you have collectibles you can put up for sale on an online auction, or quality household items for a garage or tag sale. Also, you can think about selling any investments you own.
Borrow money from a retirement plan. Research the specifics for your particular plan. You can take out funds from a 401(k) for you down payment or withdraw from an IRA. Be sure you understand about any penalties, the way this could affect on income taxes, and repayment obligation.
Ask for help from generous members of your family. First-time buyers are sometimes fortunate enough to get help with their down payment assistance from thoughtful family members who are willing to help them get into their own home. Your family members may be pleased at the chance to help you reach the milestone of owning your first home.
Contact housing finance agencies. Provisional loan programs are given to buyers in certain circumstances, such as low income purchasers or future homeowners planning to remodel houses in a particular area, among others. Financing with a housing finance agency, you probably will be given an interest rate that is below market, down payment assistance and other benefits. Housing finance agencies may help you with a lower interest rate, help with your down payment, and provide other benefits. The main goal of not-for-profit housing finance agencies is boosting the purchase of homes in targeted places.
Research no-down and low-down mortgages.
- 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 critical part in helping low to moderate-income buyers qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who need to qualify for mortgages.
FHA offers mortgage insurance to the private lenders, enabling new homebuyers who might not be eligible for a traditional mortgage loan, to get a mortgage.
Interest rates with an FHA loan are typically the market interest rate, while the down payment with an FHA loan will be below those of conventional loans. The down payment can go as low as 3 percent while the closing costs could be covered by the mortgage loan.
- VA mortgage loans
With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This specialized loan does not require a down payment, has reduced closing costs, and provides the advantage of a competitive rate of interest. While the VA doesn't finance the mortgage loans, it does issue a certificate of eligibility to apply for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes at the same time as the first. Generally the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage covers 80 percent. The homebuyer covers the remaining 10%, rather than putting the typical 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to lend you a portion of his own equity to help you get your down payment money. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lender and finance the remaining amount with the seller. Usually this kind of second mortgage has higher interest.
No matter how you gather your down payment money, the satisfaction of reaching the goal of owning your own home will be just as great!
Need to talk about down payment options? Give us a call: (303) 228-2254.