Putting Together Your Down Payment

Lots of borrowers qualify for various loan programs, but they don't have a large sum of cash to pay the standard down payment. Here are a few tips:

Cut expenses and save. Look for ways to trim your monthly expenditures to set aside funds for a down payment. Also, you can look into bank programs through which some 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 skip a vacation.

Work a second job and sell items you don't need. Perhaps you can get a second job to get your down payment money. You can also get serious about the possessions you actually need and the things you can put up for sale. You might have desirable items you can sell on an online auction, or household items for a tag or garage sale. Also, you might want to think about selling any investments you hold.

Borrow your down payment from your retirement plan. Explore the specifics for your particular plan. It is possible to take out money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Make sure you comprehend the tax ramifications, repayment terms, and possible penalties for withdrawing early.

Ask for a gift from family. First-time buyers are often fortunate enough to receive down payment assistance from thoughtful parents and other family members who are willing to help get them in their own home. Your family members may be inclined to help you reach the milestone of buying your own home.

Research housing finance agencies. These agencies offer provisional mortgage programs to moderate and low income borrowers, buyers interested in remodeling a house within a specific part of the city, and other particular kinds of buyers as specified by each agency. With the help of a housing finance agency, you probably will get an interest rate that is below market, down payment help and other advantages. These types of agencies can help eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other assistance. These non-profit programs exist to promote home ownership in certain neighborhoods.

Learn about low-down and no-down mortgage loans.

  • FHA mortgage loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in assisting low to moderate-income families get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, helping the buyers to become eligible for financing. Down payment amounts for FHA loans are smaller than those of traditional mortgage loans, although these mortgages come with average interest rates. Closing costs can be covered by the mortgage, while your down payment may be as low as 3% of the total amount.

  • VA loans

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people are eligible for a VA loan, which typically offers a competitive interest rate, no down payment, and minimal closing costs. While the loans don't originate from the VA, the office certifies applicants by providing eligibility certificates.

  • Piggy-back loans

    You may fund your down payment using a second mortgage that closes with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase price, while the first mortgage finances 80 percent. Rather than the traditional 20 percent down payment, the buyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her equity. The buyer funds most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually this type of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter which strategy you use to come up with your down payment. Your new home will be your reward!

Want to discuss the best options for down payments? Call us: (303) 228-2254.

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