Building Your Down Payment

Lots of buyers can qualify for a loan, but they don't have a large sum of cash to pay the standard down payment. Want to buy a new house, but aren't sure how you should put together your down payment?

Slash the budget and build up savings. Turn your budget inside out to uncover extra money to go toward your down payment. Also, you can look into bank programs in which a portion of your take-home pay is automatically placed into a savings account each pay period. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you might move into less expensive housing, or stay close to home for your annual vacation.

Work more and sell things you do not need. Look for an additional job. This can be exhausting, but the temporary trial can help you get your down payment. You can also get creative about the items you can put up for sale. You might have desirable items you can put up for sale at an auction website, or quality household goods for a tag or garage sale. Also, you can look into selling any investments you own.

Borrow funds from your retirement plan. Check the parameters of your retirement program. Many homebuyers get down payment money from withdrawing funds from their Individual Retirement Accounts or pulling funds out of 401(k) programs. Be sure you understand the tax consequences, your obligation for repaying the money, and penalties for withdrawing early.

Ask for help from family members. Many buyers are sometimes fortunate enough to receive help with their down payment assistance from caring 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 owning your first home.

Research housing finance agencies. Special loan programs are provided to buyers in specific situations, such as low income purchasers or people looking to improve houses in a certain area, among others. With the help of this type of agency, you may receive a below market interest rate, down payment assistance and other perks. Housing finance agencies may assist you with a reduced interest rate, get you your down payment, and offer other advantages. These non-profit agencies exist to promote home ownership in particular places.

Learn about low-down and no-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 role in helping low and moderate-income Americans qualify for mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who might not be eligible for a traditional mortgage on their own, by offering mortgage insurance to private lenders. Interest rates with an FHA mortgage usually feature the going interest rate, while the down payment requirements with an FHA mortgage are below those of conventional loans. Closing costs may be included in the mortgage, while your down payment could be as low as 3 percent of the total amount.

• VA mortgages

  VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which generally offers a low rate of interest, no down payment, and reduced closing costs. Although the VA doesn't finance the mortgages, it does issue a certificate of eligibility to qualify for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes at the same time as the first. Often the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the buyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to loan you a portion of his own equity to assist you with your down payment funds. In this scenario, you would borrow the largest portion of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Usually you will pay a slightly higher interest rate on the loan from the seller.

The satisfaction will be the same, no matter how you manage to come up with your down payment. Your new home will be your reward!

Need to talk about down payment options? Call us: 9094671090.