Building Your Down Payment

Lots of borrowers can qualify for various loan programs, but they can't afford a large down payment. Below are a few methods that will help you put together your down payment

Tighten your belt and save. Turn your budget inside out to discover ways you can cut expenses to go toward your down payment. You also could enroll in an automatic savings plan at your bank to automatically have a set portion of your take-home pay moved into savings. You would be wise to look into some big expenses in your budget that you can do without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Sell items you don't need and find 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 may be able to sell. You may have desirable items you can sell at an auction website, or quality household goods for a garage or tag sale. You might also look into what any investments you own will sell for.

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

Request a generous gift from your family. First-time homebuyers are sometimes lucky enough to get down payment help from giving family members who may be prepared to help them get into their own home. Your family members may be eager to help you reach the goal of buying your own home.

Research housing finance agencies. These agencies offer provisional mortgage loans to moderate and low income homebuyers, buyers with an interest in remodeling a residence within a targeted area, and additional groups as defined by each finance agency. With the help of a housing finance agency, you may receive a below market interest rate, down payment help and other advantages. Housing finance agencies can assist you with a reduced interest rate, get you your down payment, and provide other benefits. The primary mission of not-for-profit housing finance agencies is build up home ownership in particular areas.

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

  • Federal Housing Administration (FHA) mortgage loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in assisting low and moderate-income individuals get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling buyers who might not qualify for a typical loan, to get a mortgage. Down payment totals for FHA mortgages are lower than those with conventional mortgage loans, although these loans have current rates of interest. Closing costs might be covered by the mortgage, and your down payment might be as low as 3 percent of the total.

  • VA mortgages

    With a guarantee from 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 the benefit of a competitive rate of interest. Even though the VA does not actually issue the loans, it does issue a certificate of eligibility to qualify for a VA loan.

  • Piggy-back loans

    You can finance a down payment using a second mortgage that closes along with the first. Generally the first mortgage is for 80% of the purchase price and the "piggyback" funds 10%. In contrast to the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    With a carry-back mortgage, the you borrow a portion of the seller's home equity.. The buyer funds most of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Generally, this kind 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 the down payment. Your new home will be well worth it!

Need to talk about your down payment? Call us at 503-657-3311.