Building Your Down Payment

Many borrowers can qualify for a loan, but they can't afford a large down payment. Want to buy a new home, but don't know how to put together your down payment?

Cut expenses and save. Be on the look-out for ways to reduce your monthly expenditures to save toward a down payment. You also could enroll in an automatic savings plan at your bank to automatically have a specific portion of your paycheck transferred into your savings account. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. For example, you may move into less expensive housing, or skip a family vacation.

Work more and sell items you do not need. Look for an additional job. This can be exhausting, but the temporary difficulty can provide your down payment money. In addition, you can make an exhaustive list of items you may be able to sell. Unused gold jewelry can bring a good amount from local jewelers. Multiple small things may add up to a nice sum at a garage or tag sale. Also, you can look into selling any investments you hold.

Tap into retirement funds. Investigate the provisions of your retirement plan. Many people get down payment money by withdrawing funds from IRAs or getting money out of their 401(k) programs. Make sure you understand the tax consequences, your obligation for repayment, and any early withdrawal penalties.

Ask for assistance from family members. First-time homebuyers are often lucky enough to get help with their down payment help from gracious family members who are able to help them get into their own home. Your family members may be happy at the chance to help you reach the goal of owning your own home.

Learn about housing finance agencies. These types of agencies offer provisional mortgage loans for low and moderate-income buyers, buyers interested in renovating a house in a targeted part of the city, and other specific kinds of buyers as specified by each finance agency. Working with a housing finance agency, you probably will receive an interest rate that is below market, down payment help and other perks. Housing finance agencies can assist eligible buyers with a lower rate of interest, help with your down payment, and offer other assistance. The principal mission of non-profit housing finance agencies is boosting the purchase of homes in certain areas.

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

  • FHA mortgage loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low and moderate-income individuals qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage loan. Down payment amounts for FHA mortgages are less than those for typical mortgages, even though these loans hold average rates of interest. Closing costs can be included in the mortgage, and your down payment can be as low as 3% of the total amount.

  • VA mortgages

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA loan, which generally offers a competitive interest rate, no down payment, and minimal closing costs. While the loans are not actually issued by the VA, the office verfifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    You may finance your down payment through a second mortgage that closes along with the first. Most of the time, the piggyback loan takes care of 10 percent of the home's price, while the first mortgage finances 80 percent. Instead of the traditional 20 percent down payment, the buyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" situation, the seller commits to lend you a portion of his home equity to help you get your down payment money. You would finance the largest portion of the purchase price with a traditional lender and borrow the remaining amount from the seller. Generally, this form of second mortgage has higher interest.

No matter how you gather down payment money, the thrill of owning your own home will be just as sweet!

Need to talk about your down payment? Call us at 719-357-6601.

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