Putting Together Your Down Payment
Many borrowers can easily qualify for a loan, but they don't have a large sum of cash to pay a down payment. Here are a few tips:
Tighten your belt and save. Look for ways to trim your monthly expenditures to set aside money for a down payment. You could also decide to enroll in an automatic savings plan to automatically have a specific amount from your paycheck moved into a savings account. Some practical approaches to put together funds include moving into housing that is less expensive, and skipping a year's vacation.
Work more and sell items you do not need. Maybe you can get an additional job to get your down payment money. You can also get creative about the things you can sell. Multiple small items can add up to a fair amount at a garage or tag sale. Also, you might want to look into selling any investments you own.
Borrow money from a retirement plan. Check the parameters of your particular plan. Some homebuyers get down payment money from withdrawing what they need from IRAs or borrowing from 401(k) programs. Be sure you understand the tax consequences, your obligation for repayment, and early withdrawal penalties.
Request a generous gift from family. Many buyers are sometimes lucky enough to get down payment help from caring parents and other family members who may be prepared to help them get into their first home. Your family members may be willing to help you reach the goal of owning your own home.
Learn about housing finance agencies. These agencies provide provisional mortgage loans for low and moderate-income buyers, buyers interested in remodeling a home within a particular part of the city, and additional groups as defined by the agency. With the help of a housing finance agency, you may get a below market interest rate, down payment assistance and other perks. These kinds of agencies may help you with a reduced rate of interest, help with your down payment, and offer other benefits. These non-profit agencies were established to build up home ownership in certain places.
Research no-down and low-down mortgages.
- FHA mortgages
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a critical part in helping low and moderate-income buyers get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers who wish to qualify for mortgage loans.
FHA offers mortgage insurance to private lenders, enabling new homebuyers who will not be eligible for a conventional loan, to obtain a mortgage.
Interest rates with an FHA mortgage are generally the going interest rate, but the down payment amounts with an FHA loan are less than those of conventional loans. The required down payment can go as low as three percent while the closing costs could be financed in the mortgage loan.
- VA loans
With a guarantee from the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This particular loan does not require a down payment, has limited closing costs, and offers a competitive rate of interest. Even though the VA doesn't actually issue the mortgages, 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 along with the first. Usually the piggyback loan is for 10 percent of the home's amount, and the first mortgage covers 80 percent. Instead of the traditional 20 percent down payment, the buyer just has to cover the remaining 10 percent.
- Carry-Back loans
We a seller carries back a second mortgage, the seller loans you part of his or her home equity. In this scenario, you would borrow the majority of the purchase price from a traditional lender and borrow the remainder from the seller. Usually you will pay a slightly higher interest rate on the loan financed by the seller.
No matter how you gather your down payment, the satisfaction of owning your own home will be just as sweet!
Need to talk about down payment options? Give us a call at (434) 975-5626.