Your Down Payment

Lots of borrowers can easily qualify for a loan, but they don't have a lot of money to put up a down payment. Want to buy a new home, but aren't sure how you should get together your down payment?

Slash the budget and build up savings. Look for ways you can reduce your expenses to put away money for a down payment. You could also decide to enroll in an automatic savings plan to automatically have a set amount from your take-home pay transferred into your savings account. Some effective approaches to save additional funds include moving into less expensive housing, and skipping your family vacation for a year or two.

Sell items you do not really need and find a second job. Perhaps you can find a second job and build up your earnings. You can also get serious about the possessions you actually need and the things you can put up for sale. You may own collectibles you can sell at an online auction, or household items for a garage or tag sale. Also, you might want to look into selling any investments you hold.

Borrow your down payment from a retirement plan. Explore the specifics of your individual plan. It is possible to borrow money from a 401(k) plan for a down payment or perform a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, your obligation for repaying funds, and penalties for withdrawing early.

Ask for a gift from family. First-time buyers somtimes receive help with their down payment help from caring family members who are willing to help get them in their own home. Your family members may be pleased to help you reach the milestone of buying your first home.

Contact housing finance agencies. These types of agencies offer special mortgate loan programs- for low and moderate-income homebuyers, buyers interested in rehabilitating a residence in a targeted part of the city, and additional groups as defined by each agency. Working through a housing finance agency, you probably will receive a below market interest rate, down payment help and other incentives. Housing finance agencies can help you with a lower rate of interest, get you your down payment, and provide other assistance. These non-profit agencies exist to promote home ownership in particular areas.

Explore no-down and low-down mortgage loan programs.

• FHA mortgage loans

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in aiding low to moderate-income buyers qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgage loans. FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for financing. Interest rates with an FHA mortgage normally feature the current interest rate, while the down payment for an FHA loan are lower than those of conventional loans. Closing costs may be covered by the mortgage, and your down payment may be as low as 3 percent of the total.

• VA loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which generally offers a competitive interest rate, no down payment, and minimal closing costs. Although the VA does not issue the loans, it does certify eligibility to qualify for a VA loan.

• Piggy-back loans

  You can finance a 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, and the first mortgage finances 80 percent. The borrower pays the remaining 10%, instead of putting the usual 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you a piece of his home equity to help you get your down payment money. The buyer finances the highest percentage of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Often, this kind of second mortgage has higher interest.

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!

Need to talk about your down payment? Give us a call: (562) 693-5048.