Your Down Payment
Many folks who are looking to buy a new home can easily qualify for various loan programs, but they can't afford a large down payment. Here are a few straightforward ways to put together your down payment
Tighten your belt and save. Scrutinize the budget to uncover extra money to save for your down payment. There are bank programs through which some of your take-home pay is automatically deposited into a savings account every pay period. Some effective ways to save additional funds include moving into less expensive housing, and skipping a year's vacation.
Sell items you do not need and find a part-time job. Perhaps you can get an additional job and build up your earnings. You can also get creative about the things you can sell. A closetful of small items might add up to a nice sum at a garage or tag sale. Also, you can consider selling any investments you own.
Borrow your down payment from a retirement plan. Investigate the provisions of your retirement plan. You may borrow funds from a 401(k) plan for a down payment or withdraw from an IRA. Be sure you know about any penalties, the effect this may have on your taxes, and repayment obligation.
Ask for help from generous members of your family. First-time homebuyers are often lucky enough to get down payment assistance from thoughtful family members who are prepared to help them get into their first home. Your family members may be pleased to help you reach the milestone of buying your first home.
Learn about housing finance agencies. These types of agencies provide special mortgage loans to low and moderate-income buyers, buyers with an interest in remodeling a home in a targeted part of the city, and other certain types of buyers as defined by each finance agency. Financing through this type of agency, you can get an interest rate that is below market, down payment assistance and other perks. These types of agencies may assist you with a reduced interest rate, help with your down payment, and provide other benefits. The primary purpose of non-profit housing finance agencies is build up the purchase of homes in particular places.
Learn about low-down and no-down mortgage loan programs.
- Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income individuals qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers who need to qualify for home financing.
FHA provides mortgage insurance to private lenders, enabling homebuyers who will not be eligible for a traditional loan, to receive financing.
Interest rates with an FHA loan generally feature the current interest rate, but the down payment with an FHA loan are below those of conventional loans. The down payment can go as low as three percent while the closing costs could be packaged in the mortgage loan.
- VA loans
With a guarantee from the Department of Veterans Affairs, a VA loan assists service people and veterans. This particular loan requires no down payment, has limited closing costs, and offers a competitive interest rate. While the mortgages don't originate from the VA, the office certifies applicants by issuing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close along with the first. Generally the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the buyer just has to pull together the remaining 10 percent.
- Carry-Back loans
In the option of the seller "carrying back a second mortgage," the seller loans you part of his or her home equity. You would borrow the largest portion of the purchase price from a traditional mortgage lending institution and borrow the remainder from the seller. Usually you'll pay a slightly higher interest rate with the loan financed by the seller.
The satisfaction will be the same, no matter which strategy you use to come up with your down payment. Your new home will be your reward!
Want to discuss the best options for down payments? Call us: (707) 252-2700.