Building Your Down Payment

Lots of buyers can qualify for several different kinds of mortgages, but they don't have a lot of money to pay a down payment. Do you want to look into getting a new house, but don't know how to get together a down payment?

Cut expenses and save. Turn your budget inside out to find ways you can cut expenses to save for your down payment. You also might enroll in an automatic savings plan at your bank to automatically have a predetermined portion of your take-home pay deposited into savings. Some effective approaches to put together funds include moving into less expensive housing, and skipping a year's vacation.

Sell items you do not need and find a part-time job. Maybe you can get an additional job to get your down payment money. You can also seriously consider the possessions you actually need and the things you can put up for sale. You might own collectibles you can sell at an auction website, or quality household items for a garage or tag sale. You could also explore what your investments will bring if sold.

Borrow from retirement funds. Check the parameters of your particular plan. Many people get down payment money by withdrawing what they need from Individual Retirement Accounts or borrowing from their 401(k) plans. Be sure you are knowledgable about any penalties, the way this may affect on your taxes, and repayment terms.

Request a gift from family. First-time buyers somtimes receive down payment assistance from thoughtful parents and other family members who may be willing to help get them in their own home. Your family members may be eager to help you reach the milestone of owning your first home.

Learn about housing finance agencies. Special loan programs are provided to homebuyers in certain circumstances, such as low income homebuyers or future homeowners planning to improve homes in a particular neighborhood, among others. Financing with this kind of agency, you can get a below market interest rate, down payment assistance and other incentives. These types of agencies may assist eligible homebuyers with a lower rate of interest, help with your down payment, and offer other assistance. The primary mission of not-for-profit housing finance agencies is to boost residence ownership in targeted places.

Learn about low-down and no-down mortgage loans.

  • Federal Housing Administration (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 families get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting mortgages. FHA provides mortgage insurance to private lenders, enabling new homebuyers who will not be eligible for a typical loan, to get a mortgage. Interest rates with an FHA mortgage are typically the going interest rate, but the down payment with an FHA loan will be lower than those of conventional loans. The required down payment may go as low as 3 percent and the closing costs may be financed in the mortgage.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan requires no down payment, has limited closing costs, and provides a competitive rate of interest. Although the VA does not issue the mortgages, it does issue a certificate of eligibility to apply for a VA loan.

  • Piggy-back loans

    You may finance your down payment with a second mortgage that closes along with the first. Generally the first mortgage is for 80% of the purchase amount and the "piggyback" funds 10%. Rather than the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In the option of the seller "carrying back a second mortgage," the seller loans you part of his or her equity. The buyer funds the highest percentage of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Usually you'll pay a slightly higher interest rate with the loan financed by the seller.

The feeling of accomplishment will be the same, no matter which strategy you use to come up with the down payment. Your new home will be well worth it!

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

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