Building Your Down Payment

Lots of people who would like to purchase a new house qualify for several different kinds of mortgages, but they don't have a lot of money to pay the standard down payment. Want to buy a new home, but aren't sure how to put together your down payment?

Reduce expenses and save. Look for ways you can reduce your expenditures to set aside money for a down payment. There are bank programs in which a specific portion of your paycheck is automatically transferred into a savings account each pay period. Some effective approaches to put together funds include moving into a residence that is less expensive, and skipping a year's vacation.

Work more and sell things you do not need. Maybe you can find an additional job to get your down payment money. You can also seriously consider the possessions you really need and the things you could be able to sell. You may own collectibles you can put up for sale at an online auction, or quality household items for a tag or garage sale. You might also look into what any investments you hold could sell for.

Borrow your down payment from a retirement plan. Investigate the provisions of your particular plan. It is possible to pull out funds from a 401(k) for you down payment or withdraw from an IRA. Be sure you understand the tax ramifications, your obligation for repaying funds, and any penalties for withdrawing early.

Request a gift from your family. First-time homebuyers are often lucky enough to receive help with their down payment assistance from caring family members who may be prepared to help get them in their first home. Your family members may be eager to help you reach the goal of having your first home.

Learn about housing finance agencies. Provisional mortgage loans are provided to homebuyers in certain situations, such as low income homebuyers or people looking to renovating houses in a specific place, among others. With the help of a housing finance agency, you may receive a below market interest rate, down payment help and other benefits. These types of agencies can help you with a lower rate of interest, get you your down payment, and offer other advantages. These non-profit agencies were established to build up community in specific neighborhoods.

Find out about low-down and no-down mortgage loans.

• FHA mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low and moderate-income buyers get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling homebuyers who may not be eligible for a traditional mortgage, to obtain a mortgage. Interest rates for an FHA loan are usually the current interest rate, while the down payment amounts with an FHA mortgage will be below those of conventional loans. The down payment may be as low as three percent and the closing costs might be packaged in the mortgage.

• VA loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which typically offers a competitive fixed interest rate, no down payment, and reduced closing costs. Although the VA does not actually finance the mortgages, it does certify eligibility to qualify for a VA mortgage.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close along with the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. Rather than the traditional 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to loan you a piece of his own equity to help you with your down payment money. You would borrow the largest portion of the purchase price from a traditional mortgage lender and borrow the remaining amount from the seller. Typically, this type of second mortgage will have higher interest.

The feeling of accomplishment will be the same, no matter how you manage to put together your down payment. Your new home will be your reward!

Need to talk about down payments? Call us at (585) 282-0960.