Putting Together Your Down Payment

Many buyers can qualify for various loan programs, but they can't afford a large down payment. Here's where to get started

Slash the budget and build up savings. Look for ways to reduce your expenses to set aside funds for a down payment. There are bank programs in which a portion of your take-home pay is automatically placed into savings each pay period. You would be wise to look into some big expenses in your spending history that you can do without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work more and sell things you do not need. Perhaps you can find an additional job and save your earnings. You can also seriously consider the possessions you actually need and the things you can sell. Maybe you have collectibles you can put up for sale on an online auction, or household goods for a garage or tag sale. You could also look into what your investments will sell for.

Borrow from retirement funds. Research the details of your individual plan. Some homebuyers get down payment money by withdrawing from their IRAs or borrowing from 401(k) programs. You will need to ensure you are knowledgable about any penalties, the effect this may have on your taxes, and repayment terms.

Ask for help from generous members of your family. First-time buyers somtimes receive down payment help from giving parents and other family members who may be prepared to help them get into their first home. Your family members may be eager to help you reach the milestone of having your first home.

Learn about housing finance agencies. Special mortgate loan programs are extended to buyers in certain situations, such as low income buyers or people planning to improve homes in a specific place, among others. With the help of a housing finance agency, you probably will receive an interest rate that is below market, down payment help and other advantages. These types of agencies can assist eligible homebuyers with a reduced rate of interest, help with your down payment, and offer other assistance. The principal mission of not-for-profit housing finance agencies is boosting home ownership in targeted places.

Research no-down and low-down mortgages.

• FHA mortgage loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low to moderate-income individuals get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling buyers who might not be eligible for a conventional loan, to receive a mortgage. Interest rates with an FHA loan are generally the current interest rate, but the down payment amounts for an FHA loan will be lower than those of conventional loans. The required down payment may be as low as three percent and the closing costs could be covered by the mortgage.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This specialized loan does not require a down payment, has mimimal closing costs, and provides the advantage of a competitive interest rate. While the VA does not actually issue the mortgages, it does issue a certificate of eligibility to qualify for a VA mortgage.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes along with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  We a seller carries back a second mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would borrow the majority of the purchase price from a traditional mortgage lender and finance the remainder with the seller. Usually you will pay a somewhat higher rate with the loan from the seller.

Want to discuss down payments? Call us: 7193576601.