Building Your Down Payment

Many borrowers qualify for several different kinds of mortgages, but they don't have much to put up the standard down payment. Do you want to look into getting a new home, but aren't sure how you should get together your down payment?

Slash the budget and build up savings. Look for ways to reduce your expenses to set aside money for a down payment. There are bank programs in which some of your take-home pay is automatically transferred into savings every pay period. You could look into some big expenses in your budget that you can live without, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.

Sell things you do not need and find a part-time job. Maybe you can get a second job and build up your earnings. In addition, you can put together a comprehensive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelers. Multiple small items may add up to a fair amount at a garage or tag sale. You can also research what any investments you hold will sell for.

Borrow money from your retirement plan. Investigate the parameters of your retirement plan. You may take out funds from a 401(k) plan for you down payment or withdraw from an Individual Retirement Account. Be sure you understand about any penalties, the effect this will have on your income taxes, and repayment obligation.

Ask for a generous gift from family. Many homebuyers somtimes get help with their down payment assistance from gracious family members who are anxious to help them get into their first home. Your family members may be willing to help you reach the milestone of owning your own home.

Contact housing finance agencies. These agencies provide provisional mortgage programs to low and moderate-income homebuyers, buyers interested in rehabilitating a home in a specific part of the city, and additional specific types of buyers as defined by the finance agency. Financing with a housing finance agency, you can receive a below market interest rate, down payment help and other advantages. These types of agencies may assist you with a lower rate of interest, get you your down payment, and offer other assistance. These non-profit programs to build up community in certain neighborhoods.

Research no-down and low-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 a vital role in aiding low and moderate-income buyers qualify for mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling new homebuyers who will not be eligible for a conventional loan, to receive home financing. Interest rates for an FHA loan are typically the going interest rate, while the down payment for an FHA mortgage are lower than those of conventional loans. Closing costs might be covered by the mortgage, and your down payment might be as low as 3 percent of the total amount.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This particular loan does not require a down payment, has limited closing costs, and offers a competitive rate of interest. Even though the VA does not provide the mortgages, it does issue a certificate of eligibility to qualify for a VA loan.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the purchase price, while the first mortgage covers 80 percent. Rather than the usual 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the you borrow part of the seller's home equity.. In this scenario, you would borrow the largest portion of the purchase price from a traditional lender and finance the remainder with the seller. Generally, this kind of second mortgage will have higher interest.

No matter your method of pulling together your down payment money, the satisfaction of living in your own home will be just as great!

Want to discuss down payment options? Call us: 425-508-9988.

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