Building Your Down Payment

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Many buyers qualify for various loan programs, but they can't afford a large down payment. Here's where to get started

Tighten your belt and save. Scrutinize your budget to discover ways you can cut expenses 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 a savings account each pay period. Some practical ways to save additional funds include moving into housing that is less expensive, and staying home for your family vacation for a year or two.

Work more and sell things you do not need. Maybe you can get a second job to get your down payment money. Additionally, you can put together a comprehensive list of items you may be able to sell. Unused gold jewelry can bring a good price from local jewelry stores. Maybe you own desirable items you can put up for sale on an online auction, or household goods for a tag or garage sale. You can also explore what any investments you hold will sell for.

Borrow from a retirement plan. Research the details of your individual plan. Some homebuyers get down payment money from withdrawing funds from Individual Retirement Accounts or getting money out of 401(k) plans. Be sure to find out about the tax ramifications, repayment terms, and penalties for withdrawing early.

Ask for a generous gift from your family. First-time homebuyers sometimes receive help with their down payment assistance from thoughtful family members who may be able to help them get into their first home. Your family members may be eager to help you reach the milestone of owning your own home.

Contact housing finance agencies. Special mortgage loans are extended to homebuyers in certain situations, like low income purchasers or people planning to remodel houses in a specific neighborhood, among others. With the help of a housing finance agency, you can be given a below market interest rate, down payment assistance and other benefits. Housing finance agencies may assist you with a reduced rate of interest, get you your down payment, and offer other benefits. The main mission of non-profit housing finance agencies is build up residential ownership in certain areas.

Learn about low-down and no-down mortgages.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income individuals get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to get mortgages. FHA aids first-time homebuyers and others who might not be able to qualify for a traditional mortgage loan by themselves, by offering mortgage insurance to private lenders. Interest rates with an FHA mortgage usually feature the going interest rate, while the down payment for an FHA loan are lower than those of conventional loans. The down payment can be as low as three percent and the closing costs might be covered by the mortgage.

  • VA loans

    With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan does not require a down payment, has limited closing costs, and provides a competitive interest rate. Although the mortgages are not actually financed by the VA, the department certifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close along with the first. Most of the time, the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. The borrower pays the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In the option of the seller "carrying back a second mortgage," the seller loans you part of his or her equity. In this scenario, you would finance the largest portion of the purchase price with a traditional lending institution and finance the remainder with the seller. Generally, this kind of second mortgage will have higher interest.

No matter your strategy of pulling together your down payment funds, the thrill of reaching the goal of living in your own home will be just as great!

Want to discuss down payment options? Call us at (408) 255-3978.