Building Your Down Payment

Lots of folks who would like to purchase a new home can easily qualify for several different kinds of mortgages, but they don't have a large sum of cash to put up the standard down payment. Do you want to buy a new home, but aren't sure how you should get together a down payment?

Slash your budget and build up savings. Scrutinize the budget to discover ways you can cut expenses to go toward your down payment. There are bank programs in which some of your take-home pay is automatically placed into savings each pay period. Some practical strategies to save additional funds include moving into housing that is less expensive, and skipping a year's vacation.

Work a second job and sell things you do not need. Try to get an additional job. This can be exhausting, but the temporary difficulty can help you get your down payment. Additionally, you can put together an exhaustive inventory of items you may be able to sell. Broken gold jewelry can be sold at local jewelry stores. Multiple small items might add up to a nice sum at a garage or tag sale. You can also explore what any investments you have could bring if sold.

Borrow your down payment from a retirement plan. Research the details for your particular plan. You can pull out funds from a 401(k) for you down payment or get a withdrawal from an IRA. Make sure to learn about the tax consequences, repayment terms, and possible penalties for withdrawing early.

Ask for assistance from generous members of your family. First-time buyers are often lucky enough to get help with their down payment assistance from giving family members who are able to help get them in their own home. Your family members may be eager to help you reach the milestone of owning your first home.

Contact housing finance agencies. These agencies provide provisional mortgage programs for moderate and low income buyers, buyers interested in remodeling a house in a particular part of the city, and additional groups as defined by the agency. With the help of 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 help eligible buyers with a reduced interest rate, help with your down payment, and offer other advantages. The central goal of not-for-profit housing finance agencies is to boost the purchase of homes in particular places.

Find out about low-down and no-down mortgages.

• Federal Housing Administration (FHA) loans

  The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in helping low to moderate-income individuals get mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to qualify for home financing. FHA helps first-time buyers and others who might not be eligible for a conventional mortgage on their own, by providing mortgage insurance to lenders. Down payment totals for FHA mortgages are below those of traditional mortgage loans, although these mortgages come with average interest rates. Closing costs may be included in the mortgage, and the down payment can be as low as 3 percent of the total amount.

• VA loans

  VA loans are backed by the Department of Veterans Affairs. Veterens and service people can benefit from a VA loan, which usually offers a competitive rate of interest, no down payment, and limited closing costs. While the VA doesn't actually issue the mortgages, it does issue a certificate of eligibility to apply for a VA mortgage.

• Piggy-back loans

  You may finance a down payment using a second mortgage that closes at the same time as the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, instead of needing to put together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller commits to lend you some of his home equity to help you get your down payment funds. The buyer funds the majority of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Typically you'll pay a somewhat higher interest rate on the loan from the seller.

No matter your method of putting together down payment funds, the satisfaction of living in your own home will be just as great!

Need to talk about down payment options? Give us a call: 1-800-606-2794.