Putting Together Your Down Payment
Lots of buyers qualify for several different kinds of mortgages, but they don't have a lot of money to pay the standard down payment. Here are a few tips:
Slash the budget and build up savings. Be on the look-out for ways you can reduce your monthly expenses to save toward a down payment. Also, you can look into bank programs through which a specific portion of your paycheck is automatically transferred into savings every pay period. You might look into some big expenses in your budget that you can do without, or reduce, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.
Sell items you do not really need and get a part-time job. Look for a second job. This can be exhausting, but the temporary difficulty can provide your down payment money. You can also get creative about the things you can put up for sale. Maybe you have collectibles you can sell at an auction website, or household goods for a tag or garage sale. You could also research what your investments will bring if sold.
Tap into your retirement funds. Investigate the parameters of your specific program. Many people get down payment money from withdrawing what they need from their IRAs or getting funds out of 401(k) plans. Be sure to learn about the tax ramifications, repayment terms, and possible penalties for withdrawing early.
Ask for help from generous family members. Many buyers are often fortunate enough to receive help with their down payment assistance from gracious family members who may be anxious to help them get into their own home. Your family members may be willing to help you reach the goal of owning your own home.
Learn about housing finance agencies. These types of agencies offer special mortgate loan programs- for low and moderate-income borrowers, buyers interested in renovating a home in a specific area, and other groups as specified by each finance agency. Working with a housing finance agency, you can be given an interest rate that is below market, down payment help and other perks. These types of agencies can assist eligible buyers with a reduced rate of interest, get you your down payment, and offer other advantages. The primary mission of non-profit housing finance agencies is promoting home ownership in targeted places.
Learn about low-down and no-down mortgage loans.
- FHA mortgages
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical part in assisting low to moderate-income buyers qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to get mortgages.
FHA helps first-time buyers and others who might not be eligible for a traditional mortgage on their own, by providing mortgage insurance to private lenders.
Interest rates with an FHA loan are typically the current interest rate, but the down payment requirements for an FHA loan are less than those of conventional loans. The required down payment can be as low as three percent while the closing costs can be packaged in the mortgage loan.
- VA loans
VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which typically offers a competitive interest rate, no down payment, and reduced closing costs. While the mortgages don't originate from the VA, the office certifies applicants by issuing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that closes along with the first. Generally 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 homebuyer just has to pull together the remaining 10 percent.
- Carry-Back loans
In the case of the seller "carrying back a second mortgage," the seller loans you part of his or her home equity. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and borrow the remaining amount from the seller. Typically you will pay a slightly higher rate with the loan from the seller.
No matter your method of getting together your down payment funds, the satisfaction of reaching the goal of owning your own home will be just as sweet!
Need to talk about your down payment? Give us a call at 503-657-3311.