Building Your Down Payment

Many borrowers can easily qualify for several different kinds of mortgages, but they don't have much to pay a down payment. Do you want to look into getting a new home, but don't know how you should get together your down payment?

Slash the budget and build up savings. Look for ways you can trim your monthly expenses to put away money for a down payment. Also, you can look into bank programs in which some of your paycheck is automatically placed into a savings account every pay period. You would be wise to look into some big expenses in your spending history that you can do without, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay local for your family vacation.

Sell items you do not really need and find a part-time job. Maybe you can get an additional job to get your down payment money. Additionally, you can put together an exhaustive list of items you can sell. Broken gold jewelry can be sold at local jewelers. You might have desirable items you can put up for sale on an online auction, or quality household goods for a tag or garage sale. You can also research what your investments may bring if sold.

Borrow funds from your retirement plan. Explore the specifics for your individual plan. You can pull out money from a 401(k) plan for a down payment or withdraw from an IRA. Make sure you are clear about any penalties, the way this will affect on taxes, and repayment terms.

Request a gift from family. Many buyers somtimes get help with their down payment assistance from thoughtful parents and other family members who are eager to help them get into their own home. Your family members may be eager to help you reach the milestone of having your first home.

Learn about housing finance agencies. These agencies offer special loan programs for low and moderate-income borrowers, buyers with an interest in rehabilitating a house in a targeted part of the city, and additional specific kinds of buyers as specified by the agency. Working with this type of agency, you probably will receive a below market interest rate, down payment assistance and other perks. Housing finance agencies can help eligible buyers with a reduced rate of interest, help with your down payment, and offer other benefits. These non-profit programs exist to boost community in specific neighborhoods.

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

• FHA mortgages

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income Americans get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting home financing. FHA helps first-time buyers and others who may not be able to qualify for a conventional mortgage on their own, by offering mortgage insurance to the lenders. Interest rates for an FHA loan typically feature the going interest rate, but the down payment with an FHA loan will be below those of conventional loans. The down payment may be as low as 3 percent while the closing costs might be financed in the mortgage.

• VA loans

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which typically offers a competitive fixed rate of interest, no down payment, and limited closing costs. Although the mortgages aren't actually issued by the VA, the office certifies applicants by providing eligibility certificates.

• Piggy-back loans

  You can fund your down payment with a second mortgage that closes at the same time as the first. Often the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, instead of having to pull together the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller commits to lend you a portion of his home equity to help you get your down payment money. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remaining amount with the seller. Typically you will pay a slightly higher interest rate with the loan financed by the seller.

The feeling of accomplishment will be the same, no matter which approach you use to come up with your down payment. Your new home will be your reward!

Need to talk about the best options for down payments? Give us a call at 5852820960.