Building Your Down Payment

Many buyers can qualify for a mortgage loan, but they can't afford a large down payment. We have a few ideas

Reduce expenses and save. Scrutinize your budget to discover ways you can cut expenses to save for your down payment. You could also try enrolling in an automatic savings plan to have a percentage of your payroll automatically transferred into savings. You could look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your vacation.

Sell items you do not really need and get a part-time job. Maybe you can find a second 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. Maybe you have desirable items you can put up for sale at an auction website, or household items for a garage or tag sale. You can also look into what any investments you hold could bring if sold.

Borrow from a retirement plan. Investigate the provisions of your particular plan. Many homebuyers get down payment money by withdrawing from IRAs or getting money out of their 401(k) plans. You will need to make sure you understand about any penalties, the way this will affect on your income taxes, and repayment obligation.

Ask for help from members of your family. First-time homebuyers are often fortunate enough to receive down payment assistance from thoughtful family members who are able to help get them in their own home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.

Research housing finance agencies. Provisional mortgate loan programs are extended to homebuyers in specific circumstances, such as low income buyers or homebuyers looking to remodel homes in a targeted part of town, among others. With the help of a housing finance agency, you probably will be given an interest rate that is below market, down payment assistance and other benefits. Housing finance agencies may assist you with a reduced interest rate, get you your down payment, and provide other advantages. These non-profit programs were established to promote the value of homes in particular places.

Learn about low-down and no-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 role in assisting low to moderate-income families get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who would not be able to qualify for a typical loan by themselves, by providing mortgage insurance to private lenders. Down payment requirements for FHA mortgages are below those of typical mortgages, although these loans come with average interest rates. Closing costs can be covered by the mortgage, and the down payment can be as low as 3% of the total.

  • VA mortgages

    VA loans are guaranteed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which usually offers a competitive rate of interest, no down payment, and minimal closing costs. While the loans aren't actually financed by the VA, the office certifies borrowers by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close with the first. Often the first mortgage covers 80% of the purchase price and the "piggyback" funds 10%. In contrast to the traditional 20 percent down payment, the buyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her equity. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Typically, this type of second mortgage will have higher interest.

The satisfaction will be the same, no matter which approach you use to come up with your down payment. Your brand new home will be well worth it!

Want to discuss the best options for down payments? Give us a call at (401) 583-4150.

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