Building Your Down Payment

Lots of people who would like to purchase a new home qualify for various loan programs, but they can't afford a large down payment. Below are a few methods that will help you put together a down payment

Slash your budget and build up savings. Look for ways to trim your monthly expenditures to save toward a down payment. You might also try enrolling in an automatic savings plan to automatically have a predetermined amount from your paycheck moved into a savings account. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or skip a vacation.

Work more and sell things you do not need. Maybe you can get a second job and save your earnings. You can also seriously consider the possessions you actually need and the items you migh be able to sell. Multiple small things could add up to a nice sum at a garage or tag sale. You could also look into what any investments you own will bring if sold.

Borrow funds from a retirement plan. Check the parameters of your specific program. You may take out funds from a 401(k) for you down payment or make a withdrawal from an IRA. Be sure you understand the tax ramifications, your obligation for repayment, and early withdrawal penalties.

Ask for assistance from family members. First-time homebuyers are sometimes fortunate enough to receive down payment help from giving parents and other family members who are prepared to help them get into their first home. Your family members may be pleased at the chance to help you reach the goal of having your first home.

Research housing finance agencies. Provisional mortgate loan programs are given to buyers in certain circumstances, such as low income homebuyers or buyers looking to improve homes in a certain place, among others. With the help of this type of agency, you can receive a below market interest rate, down payment help and other incentives. These kinds of agencies can assist eligible buyers with a lower rate of interest, get you your down payment, and provide other advantages. The principal goal of not-for-profit housing finance agencies is boosting residential ownership in certain parts of the city.

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

• FHA loans

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in assisting low to moderate-income Americans qualify for mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who may not be able to qualify for a conventional loan by themselves, by offering mortgage insurance to private lenders. Down payment totals for FHA loans are less than those of typical mortgages, although these mortgages have average interest rates. Closing costs might be included in the mortgage, and the down payment may be as low as 3% of the total.

• VA mortgages

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a low interest rate, no down payment, and minimal closing costs. Even though the VA does not actually finance the loans, it does issue a certificate of eligibility to apply for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Generally the piggyback loan is for 10 percent of the home's amount, and the first mortgage covers 80 percent. The homebuyer covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you part of his home equity to help you get your down payment funds. In this scenario, you would borrow the majority of the purchase price from a traditional lending institution and borrow the remainder from the seller. Often, this form of second mortgage will have higher interest.

The satisfaction will be the same, no matter how you manage to pull together the down payment. Your new home will be well worth it!

Need to talk about your down payment? Give us a call at (585) 282-0960.