Putting Together Your Down Payment

Lots of borrowers can easily qualify for a mortgage loan, but they don't have a lot of money to pay the standard down payment. Here's where you start

Tighten your belt and save. Look for ways to trim your expenses to put away money for a down payment. You could also try enrolling in an automatic savings plan to automatically have a predetermined portion of your take-home pay transferred into a savings account. You might look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your vacation.

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

Borrow funds from your retirement plan. Check the provisions of your specific program. Some homebuyers get down payment money from withdrawing from Individual Retirement Accounts or taking funds out of their 401(k) programs. Be sure to learn about the tax consequences, repayment terms, and early withdrawal penalties.

Request a gift from family. Many homebuyers are often fortunate enough to receive down payment help from caring family members who are eager to help get them in their own home. Your family members may be inclined to help you reach the milestone of owning your first home.

Learn about housing finance agencies. These agencies provide special mortgate loan programs to moderate and low income buyers, buyers with an interest in remodeling a residence within a particular area, and additional groups as specified by each finance agency. With the help of this type of agency, you may get a below market interest rate, down payment help and other advantages. Housing finance agencies may help you with a lower rate of interest, help with your down payment, and offer other assistance. These non-profit programs were formed to build up community in specific places.

Find out about low-down and no-down mortgages.

  • 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 assisting low and moderate-income buyers get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA helps first-time buyers and others who might not be able to qualify for a traditional loan by themselves, by providing mortgage insurance to the private lenders. Interest rates for an FHA loan are usually the current interest rate, but the down payment with an FHA loan are below those of conventional loans. The required down payment may be as low as 3 percent and the closing costs might be packaged in the mortgage loan.

  • VA loans

    Guaranteed by the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This particular loan requires no down payment, has mimimal closing costs, and provides the advantage of a competitive rate of interest. While the VA does not finance the loans, it does issue a certificate of eligibility to apply for a VA mortgage.

  • Piggy-back loans

    You can finance your down payment using a second mortgage that closes along with the first. Most of the time, the piggyback loan is for 10 percent of the home's amount, while the first mortgage covers 80 percent. Rather than the usual 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to lend you a portion of his own equity to assist you with your down payment funds. You would borrow the largest portion of the purchase price from a traditional lender and borrow the remainder from the seller. Typically you'll pay a slightly higher interest rate with the loan financed by the seller.

No matter how you gather your down payment funds, the satisfaction of reaching the goal of living in your own home will be just as great!

Need to talk about the best options for down payments? Give us a call: (334) 285-8850.

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