Your Down Payment
Many borrowers qualify for a mortgage loan, but they don't have much to put up a down payment. Here's where to get started
Reduce expenses and save. Turn your budget upside-down to discover extra money to go toward your down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically transferred into savings each pay period. You might look into some big expenses in your budget that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or skip a family vacation.
Work more and sell items you don't need. Perhaps you can find an additional job to get your down payment money. You can also seriously consider the possessions you really need and the things you can put up for sale. You may have collectibles you can sell at an online auction, or household items for a garage or tag sale. Also, you can look into selling any investments you own.
Borrow funds from a retirement plan. Check the parameters of your specific program. Many people get down payment money by withdrawing funds from their Individual Retirement Accounts or borrowing from 401(k) plans. Make sure to ask your plan representative about the tax consequences, repayment terms, and early withdrawal penalties.
Ask for help from generous family members. First-time buyers are often fortunate enough to receive help with their down payment assistance from gracious family members who may be able to help them get into their own home. Your family members may be happy at the chance to help you reach the goal of having your first home.
Learn about housing finance agencies. Special mortgage loans are provided to buyers in specific circumstances, like low income purchasers or homebuyers looking to renovating houses in a particular neighborhood, among others. With the help of this kind of agency, you probably will receive an interest rate that is below market, down payment help and other advantages. Housing finance agencies may help you with a reduced interest rate, help with your down payment, and provide other benefits. These non-profit agencies were established to build up the value of homes in certain neighborhoods.
Explore no-down and low-down mortgage loan programs.
- FHA loans
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low to moderate-income buyers qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who need to get home financing.
FHA offers mortgage insurance to the private lenders, helping the buyers to become eligible for a mortgage.
Interest rates with an FHA mortgage are normally the going interest rate, but the down payment amounts with an FHA mortgage are below those of conventional loans. Closing costs may be included in the mortgage, while the down payment might be as low as 3% of the total.
- VA loans
VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can receive a VA loan, which typically offers a reasonable rate of interest, no down payment, and limited closing costs. Although the 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 with the first. Most of the time, the first mortgage covers 80% of the purchase price and the "piggyback" funds 10%. The borrower covers the remaining 10%, instead of putting the typical 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller commits to loan you a piece of his home equity to help you with your down payment money. The buyer finances most of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Usually this type of second mortgage will have a higher rate of interest.
No matter your strategy of getting together your down payment money, the thrill of living in your own home will be just as sweet!
Need to talk about down payment options? Give us a call: 425-508-9988.