Building Your Down Payment

Lots of people who would like to buy a new house can easily qualify for a loan, but they can't afford a large down payment. Do you want to buy a new house, but don't know how you should put together a down payment?

Tighten your belt and save. Turn your budget upside-down to uncover ways you can cut expenses to go toward your down payment. You might also try enrolling in an automatic savings plan at your bank to have a percentage of your payroll automatically transferred into your savings account. You could look into some big expenses in your spending history that you can do without, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or stay close to home for your annual vacation.

Work more and sell items you do not need. Maybe you can find a second job and save your earnings. You can also seriously consider the possessions you really need and the things you could be able to sell. A closetful of small items may add up to a nice sum at a garage or tag sale. You could also explore what any investments you hold could sell for.

Borrow funds from a retirement plan. Check the provisions of your specific program. It is possible to borrow funds from a 401(k) for you down payment or withdraw from an IRA. You will need to ensure you understand about any penalties, the effect this will have on income taxes, and repayment terms.

Ask for assistance from members of your family. Many buyers are sometimes fortunate enough to get down payment assistance from thoughtful parents and other family members who are anxious to help get them in their first home. Your family members may be eager to help you reach the milestone of buying your own home.

Research housing finance agencies. Provisional mortgate loan programs are extended to buyers in specific situations, such as low income purchasers or people looking to renovating homes in a particular area, among others. Working with a housing finance agency, you can get a below market interest rate, down payment assistance and other incentives. These kinds of agencies may assist you with a reduced rate of interest, get you your down payment, and provide other assistance. These non-profit agencies exist to boost community in certain neighborhoods.

Research no-down and low-down mortgages.

• FHA loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low and moderate-income individuals get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to qualify for mortgages. FHA helps first-time buyers and others who would not be eligible for a typical mortgage by themselves, by providing mortgage insurance to private lenders. Down payment amounts for FHA loans are below those for typical mortgages, although these loans come with current interest rates. Closing costs may be financed within the mortgage, and your down payment might be as low as 3 percent of the total.

• VA mortgages

  Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This special loan requires no down payment, has limited closing costs, and provides a competitive interest rate. Although the loans are not actually financed by the VA, the department verfifies borrowers by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close with the first. Generally the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The borrower pays the remaining 10%, rather than 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 own equity to assist you with your down payment money. The buyer funds the highest percentage of the purchase price through a traditional mortgage program and borrows the remainder from the seller. Often, this kind of second mortgage will have a higher rate of interest.

No matter your method of putting together your down payment, the thrill of reaching the goal of living in your own home will be just as great!

Need to talk about down payments? Give us a call at 5852820960.