Your Down Payment
Lots of buyers qualify for a loan, but they can't afford a large down payment. Start here
Slash your budget and build up savings. Look for ways to trim your expenditures to set aside money for a down payment. There are bank programs in which a specific portion of your take-home pay is automatically deposited 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 stay close to home for your family vacation.
Work a second job and sell items you do not need. Perhaps you can find an additional job to get your down payment money. You can also get creative about the things you can sell. You may own collectibles you can sell at an auction website, or quality household goods for a garage or tag sale. You might also look into what your investments may sell for.
Borrow from your retirement funds. Research the details of your individual plan. You may pull out funds from a 401(k) plan for a down payment or get a withdrawal from an IRA. Make sure to learn about the tax consequences, repayment terms, and possible early withdrawal penalties.
Ask for a generous gift from your family. Many buyers are often lucky enough to get down payment help from caring parents and other family members who may be able to help them get into their first home. Your family members may be inclined to help you reach the milestone of buying your first home.
Learn about housing finance agencies. These types of agencies provide special loan programs for moderate and low income buyers, buyers interested in rehabilitating a residence within a particular part of the city, and other specific types of buyers as defined by the finance agency. Working with a housing finance agency, you can be given an interest rate that is below market, down payment assistance and other incentives. These kinds of agencies can help eligible buyers with a reduced interest rate, get you your down payment, and provide other advantages. These non-profit agencies were formed to boost community in particular areas.
Find out about low-down and no-down mortgages.
- FHA mortgage loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income Americans qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to get mortgages.
FHA offers mortgage insurance to the private lenders, making the buyers eligible for a home loan.
Interest rates for an FHA loan usually feature the market interest rate, but the down payment for an FHA loan are below those of conventional loans. Closing costs may be financed within the mortgage, while your down payment may be as low as 3% of the purchase price.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This special loan does not require a down payment, has mimimal closing costs, and offers a competitive interest rate. Although the VA does not actually issue the mortgages, it does certify eligibility to qualify for a VA mortgage.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes at the same time as the first. Usually the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. The borrower pays the remaining 10%, rather than having to put together the typical 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to lend you some of his own equity to help you get your down payment funds. You would finance the largest portion of the purchase price with a traditional mortgage lender and finance the remainder with the seller. Often, this form of second mortgage will have a higher rate of interest.
No matter your method of pulling together your down payment funds, the thrill of living in your own home will be just as sweet!
Want to discuss down payments? Give us a call: 719-357-6601.