Building Your Down Payment

Lots of folks who would like to buy a new home can qualify for several different kinds of mortgages, but they don't have a lot of cash to pay a down payment. Start here

Tighten your belt and save. Look for ways to reduce your expenditures to save toward a down payment. Also, you can look into bank programs in which a specific portion of your paycheck is automatically transferred into savings every pay period. You would be wise to look into some big expenses in your spending history that you can live without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or stay local for your vacation.

Sell things you do not need and find a part-time job. Perhaps you can find a second job to get your down payment money. You can also get creative about the items you may be able to put up for sale. You may own desirable items you can put up for sale at an auction website, or household items for a garage or tag sale. You could also look into what any investments you own will bring if sold.

Borrow from retirement funds. Explore the details for your individual plan. It is possible to borrow funds from a 401(k) plan for you down payment or perform a withdrawal from an IRA. Make sure to ask your plan representative about the tax consequences, your obligation for repayment, and penalties for withdrawing early.

Ask for a gift from family. Many buyers somtimes get down payment assistance from thoughtful parents and other family members who may be willing to help them get into their first home. Your family members may be inclined to help you reach the goal of owning your own home.

Contact housing finance agencies. These types of agencies provide special loan programs for low and moderate-income buyers, buyers with an interest in remodeling a house in a specific area, and other specific kinds of buyers as specified by each finance agency. Working through a housing finance agency, you can get a below market interest rate, down payment help and other advantages. These types of agencies may assist eligible buyers with a lower rate of interest, get you your down payment, and provide other advantages. These non-profit programs exist to promote the value of homes in certain places.

Research no-down and low-down mortgage loans.

• FHA loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income Americans get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to qualify for mortgages. FHA provides mortgage insurance to private lenders, enabling new homebuyers who may not qualify for a conventional mortgage loan, to receive a mortgage. Interest rates for an FHA loan normally feature the current interest rate, but the down payment requirements with an FHA loan will be lower than those of conventional loans. Closing costs can be included in the mortgage, and the down payment may be as low as 3% of the total amount.

• VA mortgage loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which typically offers a low fixed rate of interest, no down payment, and minimal closing costs. Although the mortgage loans aren't actually financed by the VA, the department certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes at the same time as the first. Generally the piggyback loan takes care of 10 percent of the home's price, and the first mortgage finances 80 percent. The borrower covers the remaining 10%, rather than come up with the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you some of his home equity to assist you with your down payment funds. You would finance the largest portion of the purchase price with a traditional mortgage lender and finance the remaining amount with the seller. Typically, this type of second mortgage has higher interest.

Want to discuss down payments? Give us a call at 9254610500.