Your Down Payment
Lots of borrowers qualify for various loan programs, but they don't have a lot of money to pay the standard down payment. Do you want to buy a new home, but aren't sure how you should get together a down payment?
Reduce expenses and save. Turn your budget inside out to find ways you can cut expenses to save for your down payment. There are bank programs through which some of your take-home pay is automatically placed into a savings account every pay period. You would be wise to look into some big expenses in your budget 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 close to home for your vacation.
Sell things you do not really need and find a second job. Perhaps you can find a second job and save your earnings. You can also get serious about the possessions you really need and the items you can sell. A closetful of small items may add up to a nice sum at a garage or tag sale. Also, you might want to consider selling any investments you hold.
Borrow funds from your retirement plan. Research the specifics of your particular plan. Many homebuyers get down payment money from withdrawing from Individual Retirement Accounts or borrowing from 401(k) plans. Be sure you understand the tax consequences, repayment terms, and penalties for withdrawing early.
Ask for assistance from family members. First-time homebuyers somtimes get help with their down payment assistance from giving family members who are prepared to help them get into their first home. Your family members may be happy at the chance to help you reach the milestone of having your own home.
Research housing finance agencies. These agencies provide provisional loan programs for moderate and low income buyers, buyers interested in remodeling a home within a particular part of the city, and other specific kinds of buyers as specified by each finance agency. Financing through this type of agency, you probably will be given an interest rate that is below market, down payment help and other advantages. These kinds of agencies may assist eligible buyers with a reduced interest rate, get you your down payment, and provide other benefits. The central goal of non-profit housing finance agencies is to promote the purchase of homes in certain places.
Learn about low-down and no-down mortgage loan programs.
- 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 aiding low and moderate-income individuals get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get
FHA offers mortgage insurance to private lenders, enabling new homebuyers who might not be eligible for a traditional loan, to receive home financing.
Interest rates for an FHA loan typically feature the current interest rate, but the down payment with an FHA mortgage are below those of conventional loans. Closing costs might be financed within the mortgage, while your down payment can be as low as 3% of the purchase price.
- VA mortgage loans
VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people qualify for a VA loan, which typically offers a competitive fixed interest rate, no down payment, and limited closing costs. While it's true that the mortgage loans don't originate from the VA, the office certifies applicants by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close at the same time as the first. Generally the piggyback loan is for 10 percent of the purchase amount, and the first mortgage covers 80 percent. Rather than the traditional 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" agreement, the seller commits to loan you a piece of his home equity to help you with your down payment money. 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.
No matter how you gather your down payment, the satisfaction of reaching the goal of living in your own home will be just as great!
Want to discuss down payments? Give us a call at 718-441-7000.