Putting Together Your Down Payment

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

Cut expenses and save. Scrutinize your budget to discover ways you can cut expenses to save for your down payment. There are bank programs through which some of your paycheck is automatically placed into a savings account every pay period. You could look into some big expenses in your budget that you can live without, or reduce, at least temporarily. For example, you may move into less expensive housing, or skip a vacation.

Work a second job and sell things you don't need. Try to find a second job. This can be exhausting, but the temporary trial can provide your down payment money. You can also seriously consider the possessions you actually need and the things you can sell. Maybe you have collectibles you can put up for sale on an auction website, or quality household items for a tag or garage sale. You might also look into what any investments you own could bring if sold.

Borrow from a retirement plan. Investigate the parameters of your retirement plan. It is possible to borrow money from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Make sure you are knowledgable about any penalties, the effect this could have on your income taxes, and repayment terms.

Ask for assistance from members of your family. Many buyers are sometimes lucky enough to get help with their down payment assistance from caring parents and other family members who are able to help get them in their first home. Your family members may be pleased at the chance to help you reach the goal of owning your own home.

Research housing finance agencies. These types of agencies provide provisional mortgage loans to moderate and low income buyers, buyers with an interest in remodeling a house in a targeted area, and additional groups as specified by each finance agency. Financing with a housing finance agency, you may receive an interest rate that is below market, down payment assistance and other incentives. These types of agencies may assist eligible homebuyers with a reduced rate of interest, help with your down payment, and offer other assistance. These non-profit agencies were established to build up the value of homes in certain areas.

Explore no-down and low-down mortgage loans.

• 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 part in helping low to moderate-income buyers qualify for mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time buyers and others who may not be able to qualify for a typical mortgage loan on their own, by providing mortgage insurance to lenders. Down payment requirements for FHA loans are below those with conventional mortgages, although these mortgages have current interest rates. Closing costs might be included in the mortgage, and your down payment might be as low as 3% of the purchase price.

• VA mortgage loans

  VA loans are guaranteed by the Department of Veterans Affairs. Veterens and service people can qualify for a VA loan, which typically offers a reasonable fixed rate of interest, no down payment, and minimal closing costs. While the VA doesn't actually finance the loans, it does certify eligibility to apply for a VA loan.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close at the same time as the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The borrower covers the remaining 10%, rather than having to put together the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you part of his home equity to help you get your down payment money. You would finance the largest portion of the purchase price with a traditional lender and finance the remaining amount with the seller. Typically you'll pay a slightly higher interest rate on the loan from the seller.

No matter your method of pulling together your down payment, the thrill of owning your own home will be just as sweet!

Need to talk about your down payment? Give us a call: (707) 252-2700.