Putting Together Your Down Payment

Lots of buyers can qualify for a loan, but they can't afford a large down payment. Here are a few ideas:

Tighten your belt and save. Turn your budget upside-down to find extra money to save for your down payment. Also, you can look into bank programs in which some of your take-home pay is automatically placed into a savings account each pay period. You might look into some big expenses in your budget that you can do without, or reduce, at least temporarily. For example, you might move into less expensive housing, or stay close to home for your vacation.

Work a second job and sell things you do not need. Look for a second job. This can be exhausting, but the temporary difficulty can provide your down payment money. Additionally, you can make an exhaustive inventory of things you may be able to sell. Broken gold jewelry can be sold at local jewelers. Multiple small things may add up to a fair amount at a garage or tag sale. Also, you might want to think about selling any investments you own.

Borrow from your retirement plan. Explore the specifics of your particular plan. It is possible to pull out funds from a 401(k) plan for you down payment or withdraw from an IRA. Be sure to learn about the tax consequences, repayment terms, and any early withdrawal penalties.

Ask for a generous gift from your family. Many buyers somtimes get help with their down payment assistance from gracious family members who may be willing to help get them in their first home. Your family members may be willing to help you reach the goal of buying your own home.

Research housing finance agencies. Provisional loan programs are given to homebuyers in specific situations, such as low income homebuyers or buyers looking to renovating homes in a specific neighborhood, among others. With the help of this kind of agency, you may be given an interest rate that is below market, down payment help and other incentives. Housing finance agencies can help you with a lower interest rate, get you your down payment, and offer other advantages. These non-profit programs to promote home ownership in specific places.

Research no-down and low-down mortgage loan programs.

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low and moderate-income families get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who may not be able to qualify for a traditional loan on their own, by providing mortgage insurance to the private lenders. Interest rates for an FHA loan usually feature the market interest rate, while the down payment requirements with an FHA mortgage will be smaller than those of conventional loans. The down payment can be as low as 3 percent and the closing costs can be packaged in the mortgage loan.

  • VA mortgages

    VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can qualify for a VA loan, which generally offers a competitive fixed interest rate, no down payment, and limited closing costs. While the loans don't originate from the VA, the department certifies borrowers by issuing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes with the first. Usually the piggyback loan takes care of 10 percent of the purchase price, while the first mortgage finances 80 percent. The borrower pays the remaining 10%, rather than having to pull together the typical 20% down payment.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her home equity. In this scenario, you would finance the largest portion of the purchase price with a traditional mortgage lender and finance the remainder with the seller. Usually you will pay a slightly higher interest rate on the loan financed by the seller.

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

Want to discuss down payments? Call us: 719-357-6601.

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