Building Your Down Payment

Lots of borrowers can qualify for a loan, but they don't have a lot of money to pay a down payment. Want to look into getting a new home, but don't know how to put together a down payment?

Reduce expenses and save. Look for ways to trim your monthly expenditures to put away money for a down payment. Also, you can look into bank programs through which a specific portion of your take-home pay is automatically placed into savings each pay period. You might look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay close to home for your vacation.

Sell things you don't need and find a second job. Maybe you can find an additional job and save your earnings. You can also get serious about the possessions you actually need and the items you can put up for sale. You might have collectibles you can put up for sale on an online auction, or household goods for a tag or garage sale. Also, you can look into selling any investments you own.

Borrow your down payment from your retirement plan. Investigate the parameters of your specific program. Some people get down payment money from withdrawing what they need from their IRAs or getting money out of 401(k) plans. You will want to be sure you are knowledgable about any penalties, the way this will affect on taxes, and repayment obligation.

Ask for a generous gift from family. Many homebuyers are often fortunate enough to receive help with their down payment assistance from gracious family members who may be eager to help get them in their first home. Your family members may be pleased to help you reach the milestone of having your first home.

Research housing finance agencies. Provisional mortgage programs are given to buyers in specific situations, like low income buyers or buyers looking to remodel homes in a targeted area, among others. With the help of this type of agency, you may get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can help eligible buyers with a lower interest rate, get you your down payment, and offer other benefits. These non-profit agencies exist to boost home ownership in certain places.

Find out about low-down and no-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 an important role in helping low to moderate-income families qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting mortgages. FHA helps first-time buyers and others who might not be eligible for a conventional loan by themselves, by offering mortgage insurance to the lenders. Down payment totals for FHA mortgages are smaller than those with typical mortgages, although these mortgages come with current interest rates. The down payment can be as low as three percent while the closing costs can be financed in the mortgage loan.

• VA mortgage loans

  Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This special loan does not require a down payment, has reduced closing costs, and provides the benefit of a competitive rate of interest. While the VA doesn't issue the mortgage loans, it does certify eligibility to qualify for a VA mortgage.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Usually the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. Instead of the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to lend you a piece of his home equity to assist you with your down payment money. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remaining amount with the seller. Typically you'll pay a slightly higher rate with the loan from the seller.

No matter your strategy of pulling together your down payment, the satisfaction of reaching the goal of owning your own home will be just as great!

Want to discuss down payment options? Call us at 7184417000.