Building Your Down Payment

Many buyers qualify for a mortgage loan, but they don't have a large sum of cash to put up a down payment. Do you want to look into getting a new house, but don't know how you should get together a down payment?

Cut expenses and save. Turn your budget upside-down to find extra money to save for your down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically placed into savings each pay period. You might look into some big expenses in your spending history that you can do without, or reduce, at least temporarily. For example, you might move into less expensive housing, or skip a family vacation.

Work a second job and sell items you don't need. Perhaps you can find a second job to get your down payment money. Additionally, you can put together a comprehensive inventory of items you may be able to sell. Unused gold jewelry can be sold at local jewelers. Maybe you have collectibles you can put up for sale at an auction website, or quality household goods for a tag or garage sale. Also, you might want to consider selling any investments you own.

Borrow from your retirement plan. Research the details of your particular plan. It is possible to pull out funds from a 401(k) plan for you down payment or make a withdrawal from an IRA. Make sure you know about any penalties, the effect this could have on income taxes, and repayment obligation.

Request a gift from your family. First-time buyers somtimes receive help with their down payment assistance from gracious parents and other family members who are anxious to help them get into their own home. Your family members may be eager to help you reach the milestone of owning your first home.

Learn about housing finance agencies. Special mortgage loans are extended to buyers in certain circumstances, like low income purchasers or people planning to remodel homes in a targeted part of town, among others. With the help of a housing finance agency, you can receive an interest rate that is below market, down payment assistance and other perks. Housing finance agencies can help eligible homebuyers with a lower rate of interest, get you your down payment, and offer other benefits. These non-profit programs exist to build up community in particular neighborhoods.

Research no-down and low-down mortgages.

  • FHA mortgages

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in helping low to moderate-income families get mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling new homebuyers who will not be eligible for a conventional mortgage loan, to get a mortgage. Down payment totals for FHA mortgages are below those with traditional mortgages, even though these loans have current rates of interest. Closing costs might be financed within the mortgage, while the down payment can be as low as 3 percent of the total.

  • VA mortgages

    Guaranteed by the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This special loan does not require a down payment, has limited closing costs, and provides the benefit of a competitive interest rate. While the VA doesn't actually finance the loans, it does certify eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You may fund your down payment through a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan is for 10 percent of the purchase price, while the first mortgage finances 80 percent. Instead of the traditional 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.

  • Carry-Back loans

    In the case of a seller "carrying back a second mortgage," the you borrow a portion of the seller's home equity.. The buyer finances the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically you'll pay a slightly higher rate on the loan from the seller.

The feeling of accomplishment will be the same, no matter which strategy you use to pull together the down payment. Your brand new home will be worth it!

Want to discuss the best options for down payments? Give us a call at (707) 252-2700.