Building Your Down Payment

Lots of borrowers qualify for several different kinds of mortgages, but they can't afford a large down payment. Want to buy a new house, but aren't sure how to get together your down payment?

Cut expenses and save. Look for ways you can reduce your expenses to set aside funds for a down payment. There are bank programs through which a portion of your take-home pay is automatically placed into a savings account every pay period. You might look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a vacation.

Work a second job and sell items you don't need. Perhaps you can find an additional job to get your down payment money. You can also seriously consider the possessions you actually need and the items you can sell. A closetful of small items could add up to a nice sum at a garage or tag sale. You might also explore what any investments you have could bring if sold.

Borrow your down payment from your retirement plan. Investigate the parameters of your specific program. Some homebuyers get down payment money by withdrawing funds from their Individual Retirement Accounts or pulling funds out of their 401(k) plans. You will need to ensure you understand about any penalties, the effect this may have on your income taxes, and repayment obligation.

Request a generous gift from your family. First-time homebuyers are sometimes fortunate enough to receive help with their down payment help from gracious family members who are prepared to help get them in their first home. Your family members may be willing to help you reach the goal of having your own home.

Research housing finance agencies. These agencies offer special loan programs to moderate and low income borrowers, buyers interested in renovating a house in a specific area, and other groups as defined by each agency. With the help of a housing finance agency, you can get a below market interest rate, down payment assistance and other incentives. These kinds of agencies may help eligible buyers with a lower interest rate, help with your down payment, and provide other benefits. These non-profit agencies exist to build up home ownership in certain places.

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 an important part in aiding low to moderate-income Americans get mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time homebuyers and others who might not be eligible for a conventional mortgage by themselves, by providing mortgage insurance to the lenders. Interest rates with an FHA mortgage usually feature the current interest rate, but the down payment amounts for an FHA loan will be lower than those of conventional loans. The down payment can be as low as three percent and the closing costs might be financed in the mortgage loan.

• VA loans

  With a guarantee from 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 a competitive rate of interest. Although the mortgage loans don't originate from the VA, the office verfifies borrowers by providing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close along with the first. Often the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. Instead of the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to loan you a portion of his own equity to help you get your down payment funds. In this scenario, you would finance the majority of the purchase price with a traditional lender and borrow the remaining amount from the seller. Often, this form of second mortgage has a higher rate of interest.

Need to talk about your down payment? Call us: 5626935048.