Building Your Down Payment

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Many buyers qualify for various loan programs, but they don't have much to pay a down payment. We have a few ideas

Reduce expenses and save. Look for ways you can reduce your monthly expenditures to put away money for a down payment. Also, you can look into bank programs through which a specific portion of your take-home pay is automatically placed into savings each pay period. Some practical approaches to build up funds include moving into less expensive housing, and skipping your family vacation for a year or two.

Work more and sell items you do not need. Look for a second job. This can be rough, but the temporary trial can provide your down payment money. You can also get creative about the things you can sell. Multiple small things might add up to a fair amount at a garage or tag sale. Also, you might want to look into selling any investments you own.

Borrow money from a retirement plan. Investigate the provisions of your particular plan. Many people get down payment money from withdrawing funds from IRAs or borrowing from their 401(k) programs. Make sure to ask your plan representative about the tax consequences, repayment terms, and early withdrawal penalties.

Ask for a gift from family. First-time buyers sometimes receive down payment assistance from giving family members who may be eager to help them get into their first home. Your family members may be happy at the chance to help you reach the goal of buying your own home.

Learn about housing finance agencies. Special mortgage loan programs are offered to buyers in specific situations, such as low income purchasers or buyers planning to improve homes in a specific area, among others. Financing through a housing finance agency, you may be given an interest rate that is below market, down payment help and other perks. These types of agencies can help eligible homebuyers with a reduced interest rate, help with your down payment, and offer other benefits. These non-profit programs were established to build up the value of homes in certain neighborhoods.

Research no-down and low-down mortgages.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income Americans qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who wish to qualify for mortgage loans. FHA assists first-time homebuyers and others who might not be eligible for a conventional mortgage on their own, by providing mortgage insurance to lenders. Down payment amounts for FHA mortgages are below those of conventional mortgages, although these loans hold current rates of interest. Closing costs can be included in the mortgage, and the down payment could be as low as 3 percent of the total.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan is offered to veterans and service people. This special loan requires no down payment, has minimal closing costs, and provides a competitive rate of interest. Although the mortgage loans don't originate from the VA, the department verifies applicants by issuing eligibility certificates.

• Piggy-back loans

  You may finance your down payment with a second mortgage that closes along with the first. Most of the time, the piggyback loan takes care of 10 percent of the home's price, while the first mortgage covers 80 percent. The borrower pays the remaining 10%, instead of come up with the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to loan you a piece of his own equity to help you get your down payment funds. The buyer finances most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Usually you will pay a somewhat higher interest rate on the loan from the seller.

No matter your strategy of getting together your down payment, the satisfaction of owning your own home will be just as sweet!

Want to discuss the best options for down payments? Call us: 303.727.2466.