Building Your Down Payment

Lots of borrowers qualify for several different kinds of mortgages, but they can't afford a large down payment. Start here

Tighten your belt and save. Turn your budget upside-down to discover ways you can cut expenses to go toward your down payment. There are bank programs in which a specific portion of your take-home pay is automatically transferred into savings each pay period. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you might decide to move into less expensive housing, or skip a vacation.

Sell items you do not really need and get a second job. Look for a second job. This can be rough, but the temporary trial can provide your down payment money. Additionally, you can make a comprehensive list of items you can sell. Unworn gold jewelry can bring a good price from local jewelers. Maybe you have desirable items you can put up for sale at an auction website, or household goods for a tag or garage sale. Also, you might want to think about selling any investments you hold.

Tap into retirement funds. Check the parameters of your particular plan. You can take out money from a 401(k) for a down payment or perform a withdrawal from an Individual Retirement Account. Make sure you know about any penalties, the way this could affect on taxes, and repayment obligation.

Ask for assistance from members of your family. First-time homebuyers sometimes receive down payment help from giving family members who are willing to help them get into their own home. Your family members may be willing to help you reach the milestone of having your own home.

Learn about housing finance agencies. Special mortgage programs are offered to homebuyers in certain situations, like low income homebuyers or homebuyers planning to improve houses in a particular neighborhood, among others. Working through this type of agency, you may receive an interest rate that is below market, down payment assistance and other incentives. These types of agencies can assist eligible buyers with a reduced rate of interest, get you your down payment, and offer other advantages. These non-profit programs were established to promote community in specific places.

Learn about low-down and no-down mortgages.

• FHA mortgages

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in helping low and moderate-income individuals get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgage loans. FHA provides mortgage insurance to private lenders, enabling homebuyers who will not qualify for a typical loan, to get a mortgage. Interest rates with an FHA loan generally feature the going interest rate, but the down payment with an FHA loan are lower than those of conventional loans. The down payment may be as low as three percent and the closing costs could be covered by the mortgage.

• VA mortgage loans

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can receive a VA loan, which usually offers a competitive interest rate, no down payment, and reduced closing costs. While it's true that the mortgages aren't actually financed by the VA, the office verifies applicants by providing eligibility certificates.

• Piggy-back loans

  You may fund a down payment using a second mortgage that closes at the same time as the first. Usually the piggyback loan takes care of 10 percent of the purchase price, and the first mortgage covers 80 percent. Rather than the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In the option of the seller "carrying back a second 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 lending institution and finance the remaining amount with the seller. Often, this kind of second mortgage has higher interest.

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