Building Your Down Payment
Many buyers can easily qualify for a mortgage loan, but they can't afford a large down payment. Want to look into getting a new home, but aren't sure how you should get together a down payment?
Slash your budget and build up savings. Scrutinize the budget to uncover ways you can cut expenses to go toward your down payment. Also, you can look into bank programs in which a specific portion of your take-home pay is automatically placed into a savings account each pay period. You might look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or stay local for your vacation.
Sell things you do not need and get a second job. Perhaps you can find an additional job to get your down payment money. You can also get serious about the possessions you really need and the things you can sell. A closetful of small items could add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you own.
Borrow from retirement funds. Check the provisions of your particular program. You may borrow funds from a 401(k) for a down payment or make a withdrawal from an Individual Retirement Account. Make sure you understand the tax ramifications, repayment terms, and early withdrawal penalties.
Ask for a generous gift from your family. Many buyers are often lucky enough to get down payment assistance from thoughtful family members who are prepared to help get them in their first home. Your family members may be willing to help you reach the milestone of having your own home.
Learn about housing finance agencies. These agencies offer provisional mortgage programs to low and moderate-income buyers, buyers with an interest in renovating a home in a particular area, and other certain kinds of buyers as defined by each finance agency. With the help of this kind of agency, you can get a below market interest rate, down payment help and other benefits. Housing finance agencies can assist eligible buyers with a reduced interest rate, get you your down payment, and provide other assistance. The primary goal of non-profit housing finance agencies is boosting residence ownership in targeted areas.
Explore 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 vital part in assisting low to moderate-income families qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to get mortgage loans.
FHA offers mortgage insurance to private lenders, enabling new homebuyers who will not be eligible for a conventional mortgage loan, to receive home financing.
Interest rates with an FHA mortgage are normally the current interest rate, while the down payment for an FHA loan are below those of conventional loans. The down payment may be as low as three percent and the closing costs may be financed in the mortgage.
- VA mortgage loans
VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which usually offers a competitive rate of interest, no down payment, and limited closing costs. Although the VA doesn't finance the mortgage loans, it does certify eligibility to apply for a VA mortgage.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes along with the first. Usually the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, instead of come up with the usual 20% down payment.
- Carry-Back loans
In a "carry back" agreement, the seller commits to loan you some of his own equity to help you get your down payment money. In this scenario, you would finance the largest portion of the purchase price with a traditional lending institution and finance the remaining amount with the seller. Usually you'll pay a slightly higher rate on the loan from the seller.
The satisfaction will be the same, no matter which approach you use to come up with 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 (720) 550-4235.