Building Your Down Payment
Lots of borrowers qualify for various loan programs, but they can't afford a large down payment. Want to buy a new home, but don't know how to put together a down payment?
Tighten your belt and save. Be on the look-out for ways to reduce your monthly expenses to put away money for a down payment. There are bank programs in which a specific portion of your paycheck is automatically deposited into savings each pay period. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a vacation.
Work a second job and sell things you do not need. Look for an additional job. This can be rough, but the temporary trial can provide your down payment money. You can also seriously consider the possessions you actually need and the things you migh be able to sell. Maybe you have collectibles you can sell at an online auction, or quality household items for a garage or tag sale. You could also explore what any investments you have will sell for.
Borrow money from a retirement plan. Research the details of your individual plan. It is possible to take out money from a 401(k) plan for you down payment or withdraw from an IRA. You will need to be sure you know about any penalties, the effect this will have on income taxes, and repayment terms.
Ask for a generous gift from your family. Many homebuyers are sometimes lucky enough to receive help with their down payment assistance from giving parents and other family members who are prepared to help them get into their own home. Your family members may be willing to help you reach the milestone of owning your first home.
Research housing finance agencies. These agencies provide special mortgage programs for low and moderate-income borrowers, buyers with an interest in renovating a home in a particular area, and other particular kinds of buyers as specified by the finance agency. With the help of this kind of agency, you probably will get an interest rate that is below market, down payment help and other perks. Housing finance agencies can help eligible buyers with a reduced rate of interest, get you your down payment, and provide other advantages. These non-profit agencies were established to build up home ownership in certain places.
Research no-down and low-down mortgage loans.
- FHA mortgage loans
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low and moderate-income Americans get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in qualifying for home financing.
FHA helps first-time buyers and others who might not be eligible for a conventional mortgage on their own, by offering mortgage insurance to the private lenders.
Down payment sums for FHA mortgages are less than those for typical mortgage loans, even though these loans come with average interest rates. The down payment can go as low as 3 percent and the closing costs may be covered by the mortgage.
- VA mortgages
VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which usually offers a competitive fixed interest rate, no down payment, and reduced closing costs. Even though the VA does not finance the loans, it does issue a certificate of eligibility to qualify for a VA mortgage.
- Piggy-back loans
You may finance your down payment with a second mortgage that closes with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. Rather than the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.
- Carry-Back loans
With a carry-back mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would finance the largest portion of the purchase price with a traditional mortgage lender and finance the remaining amount with the seller. Usually this type of second mortgage has a higher rate of interest.
The satisfaction will be the same, no matter which approach you use to put together your down payment. Your new home will be worth it!
Need to talk about down payment options? Give us a call at 7193576601.