Putting Together Your Down Payment

Lots of people who would like to buy a new house can qualify for a mortgage loan, but they don't have much to put up the standard down payment. Want to buy a new home, but aren't sure how you should get together your down payment?

Slash your budget and build up savings. Be on the look-out for ways to trim your expenses to put away money for a down payment. There are bank programs in which a specific portion of your paycheck is automatically deposited into savings every pay period. You could look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your annual vacation.

Sell things you don't need and find a second job. Perhaps you can find a second job and build up your earnings. Additionally, you can make a comprehensive list of things you can sell. Unused gold jewelry can bring a good price from local jewelers. You might own collectibles you can sell on an auction website, or quality household goods for a tag or garage sale. Also, you might want to think about selling any investments you hold.

Borrow from a retirement plan. Research the details for your particular plan. Some homebuyers get down payment money by withdrawing what they need from their Individual Retirement Accounts or borrowing from their 401(k) programs. Make sure you understand about any penalties, the way this may affect on your taxes, and repayment obligation.

Request a gift from your family. Many buyers are sometimes fortunate enough to receive down payment assistance from caring parents and other family members who may be eager to help get them in their own home. Your family members may be eager to help you reach the milestone of having your own home.

Learn about housing finance agencies. Special loan programs are extended to homebuyers in specific circumstances, like low income homebuyers or people looking to renovating homes in a particular part of town, among others. Working with a housing finance agency, you may get an interest rate that is below market, down payment assistance and other incentives. These types of agencies may help you with a lower rate of interest, help with your down payment, and provide other benefits. The principal mission of not-for-profit housing finance agencies is to promote residence ownership in certain areas.

Explore no-down and low-down mortgage loans.

  • FHA mortgages

    The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low and moderate-income Americans get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to the private lenders, ensuring the buyers are eligible for a loan. Down payment requirements for FHA loans are smaller than those with traditional mortgage loans, although these mortgages have average rates of interest. Closing costs may be included in the mortgage, while your down payment could be as low as 3% of the total.

  • VA loans

    With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This specialized loan requires no down payment, has limited closing costs, and provides the benefit of a competitive rate of interest. While it's true that the loans don't originate from the VA, the department certifies applicants by providing eligibility certificates.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that closes with the first. Generally the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. In contrast to the usual 20 percent down payment, the buyer just has to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to lend you some of his home equity to help you with your down payment funds. The buyer finances the majority of the purchase price with a traditional mortgage program and borrows the remaining funds from the seller. Often, this type of second mortgage will have higher interest.

No matter how you gather down payment money, the thrill of reaching the goal of owning your own home will be just as great!

Need to talk about the best options for down payments? Give us a call at 214-869-7339.