Building Your Down Payment

Many borrowers can qualify for a mortgage loan, but they don't have a large sum of cash to pay the standard down payment. Do you want to look into getting a new house, but don't know how you should put together a down payment?

Slash the budget and build up savings. Scrutinize the budget to find extra money to save for your down payment. There are bank programs in which a specific portion of your paycheck is automatically transferred into a savings account every pay period. Some practical methods to save additional funds include moving into less expensive housing, and skipping a year's vacation.

Work more and sell items you don't need. Look for a second job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can make an exhaustive list of items you may be able to sell. Unused gold jewelry can be sold at local jewelers. Maybe you have desirable items you can put up for sale at an online auction, or household items for a tag or garage sale. Also, you might want to look into selling any investments you own.

Borrow funds from your retirement plan. Research the details of your particular plan. It is possible to pull out funds from a 401(k) for you down payment or withdraw from an Individual Retirement Account. Be sure to ask your plan representative about the tax ramifications, repayment terms, and early withdrawal penalties.

Ask for a generous gift from your family. Many homebuyers are sometimes lucky enough to receive help with their down payment assistance from giving parents and other family members who may be prepared to help them get into their first home. Your family members may be happy at the chance to help you reach the milestone of having your first home.

Learn about housing finance agencies. Special loan programs are extended to homebuyers in certain circumstances, such as low income homebuyers or people planning to renovating homes in a particular area, among others. Working with this kind of agency, you may be given an interest rate that is below market, down payment help and other incentives. These types of agencies may assist you with a lower rate of interest, help with your down payment, and provide other advantages. The main mission of not-for-profit housing finance agencies is to promote residential ownership in specific areas.

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

  • Federal Housing Administration (FHA) mortgages

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important 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) helps individuals get FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a home loan. Interest rates with an FHA mortgage are generally the current interest rate, but the down payment amounts for an FHA mortgage will be below those of conventional loans. The required down payment can be as low as 3 percent and the closing costs can be financed in the mortgage loan.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to veterens and service people. This particular loan requires no down payment, has mimimal closing costs, and offers a competitive rate of interest. Even though the loans don't originate from the VA, the office verfifies applicants by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes along with the first. Generally the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. Rather than the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the seller loans you part of his or her equity. In this scenario, you would finance the largest portion of the purchase price with a traditional lender and finance the remainder with the seller. Typically you will pay a slightly higher rate on the loan financed by the seller.

The satisfaction will be the same, no matter how you manage to come up with your down payment. Your new home will be well worth it!

Want to discuss down payment options? Call us: (434) 975-5626.