Your Down Payment

Many buyers can qualify for a mortgage loan, but they can't afford a large down payment. Here's where to get started

Slash your budget and build up savings. Be on the look-out for ways to trim your monthly expenditures to set aside funds for a down payment. There are bank programs through which some of your paycheck is automatically transferred into savings every pay period. You could look into some big expenses in your budget that you can do without, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your family vacation.

Work a second job and sell items you don't need. Perhaps you can find a second job and save your earnings. You can also get serious about the possessions you actually need and the items you may be able to sell. You may have desirable items you can put up for sale on an online auction, or household items for a garage or tag sale. Also, you might want to consider selling any investments you own.

Borrow your down payment from a retirement plan. Explore the details for your individual plan. It is possible to borrow money from a 401(k) for you down payment or get a withdrawal from an Individual Retirement Account. Be sure to find out about the tax ramifications, repayment terms, and possible penalties for withdrawing early.

Ask for assistance from generous members of your family. Many buyers somtimes get down payment help from giving parents and other family members who may be able to help get them in their first home. Your family members may be inclined to help you reach the milestone of having your first home.

Contact housing finance agencies. These agencies provide provisional mortgage programs for low and moderate-income homebuyers, buyers with an interest in renovating a residence in a targeted part of the city, and other groups as defined by the agency. With the help of this kind of agency, you may get a below market interest rate, down payment assistance and other advantages. Housing finance agencies may help you with a lower rate of interest, help with your down payment, and provide other assistance. These non-profit programs were established to boost community in particular neighborhoods.

Learn about low-down and no-down mortgages.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low to moderate-income Americans get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, enabling homebuyers who will not qualify for a traditional mortgage loan, to get financing. Interest rates for an FHA mortgage are generally the market interest rate, while the down payment with an FHA mortgage are lower than those of conventional loans. The down payment can be as low as 3 percent while the closing costs could be covered by the mortgage.

• VA loans

  VA loans are backed by the Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which typically offers a low fixed rate of interest, no down payment, and minimal closing costs. Even though the mortgages don't originate from the VA, the department certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes with the first. Most of the time, the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The homebuyer covers the remaining 10%, instead of putting the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you part of his own equity to help you with your down payment money. The buyer funds most of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically you will pay a slightly higher rate on the loan from the seller.

No matter how you gather your down payment funds, the satisfaction of owning your own home will be just as great!

Want to discuss down payment options? Call us at (707) 252-2700.