Your Down Payment
Many buyers qualify for various loan programs, but they don't have a lot of money to put up the standard down payment. Here are a few ideas:
Tighten your belt and save. Look for ways to trim your expenses to save toward a down payment. There are bank programs through which some of your paycheck is automatically deposited into savings every pay period. You would be wise to look into some big expenses in your spending history that you can do without, or reduce, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or skip a vacation.
Work a second job and sell things you do not need. Look for a second job. This can be exhausting, but the temporary trial can help you get your down payment. Additionally, you can put together a comprehensive inventory of things you may be able to sell. Unworn gold jewelry can be sold at local jewelry stores. Maybe you own collectibles you can sell on an online auction, or quality household goods for a tag or garage sale. Also, you might want to look into selling any investments you hold.
Borrow funds from your retirement plan. Check the parameters of your retirement program. It is possible to borrow funds from a 401(k) plan for a down payment or withdraw from an IRA. Be sure you understand about any penalties, the effect this may have on income taxes, and repayment terms.
Request a gift from your family. Many buyers are sometimes lucky enough to receive help with their down payment assistance from thoughtful family members who may be willing to help them get into their own 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 given to homebuyers in specific situations, like low income buyers or people looking to remodel homes in a specific neighborhood, among others. With the help of this type of agency, you can receive an interest rate that is below market, down payment help and other perks. These kinds of agencies can assist you with a lower interest rate, help with your down payment, and provide other assistance. These non-profit agencies were established to boost the value of homes in particular places.
Learn about low-down and no-down mortgages.
- FHA loans
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in helping low to moderate-income individuals get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgages.
FHA offers mortgage insurance to private lenders, ensuring the buyers are eligible for a mortgage loan.
Interest rates with an FHA loan are typically the current interest rate, while the down payment with an FHA mortgage are lower than those of conventional loans. The down payment can be as low as 3 percent while the closing costs can be covered by the mortgage.
- VA mortgage loans
Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This special loan does not require a down payment, has limited closing costs, and provides a competitive rate of interest. Although the VA doesn't actually finance the loans, it does issue a certificate of eligibility to apply for a VA loan.
- Piggy-back loans
You can fund your down payment through a second mortgage that closes with the first. Most of the time, the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. Rather than the traditional 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.
- Carry-Back loans
In a "carry back" mortgage, the seller commits to lend you a portion of his home equity to help you get your down payment funds. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Often, this type of second mortgage has a higher rate of interest.
The feeling of accomplishment will be the same, no matter how you manage to come up with your down payment. Your brand new home will be your reward!
Want to discuss down payments? Give us a call at 503-657-3311.