Building Your Down Payment

Many borrowers qualify for various loan programs, but they don't have a lot of money to pay the standard down payment. Do you want to buy a new home, but don't know how you should put together a down payment?

Tighten your belt and save. Look for ways you can trim your expenditures to save toward a down payment. You also could enroll in an automatic savings plan at your bank to have a portion of your payroll automatically moved into savings. You might look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a vacation.

Sell items you don't really need and get a second job. Perhaps you can find an additional job and build up your earnings. In addition, you can make a comprehensive inventory of items you may be able to sell. Unworn gold jewelry can bring a good amount from local jewelers. You might own desirable items you can put up for sale on an online auction, or household goods for a garage or tag sale. You might also look into what any investments you hold may bring if sold.

Tap into your retirement funds. Check the parameters of your particular plan. Many homebuyers get down payment money by withdrawing from Individual Retirement Accounts or getting money out of 401(k) plans. Make sure to ask your plan representative about the tax ramifications, your obligation for repaying the money, and any early withdrawal penalties.

Ask for help from members of your family. First-time homebuyers are often lucky enough to receive down payment help from thoughtful parents and other family members who are eager to help them get into their own home. Your family members may be eager to help you reach the goal of buying your first home.

Research housing finance agencies. These agencies provide provisional loan programs for low and moderate-income homebuyers, buyers with an interest in sprucing up a home within a specific part of the city, and additional groups as defined by each agency. With the help of this kind of agency, you may receive a below market interest rate, down payment assistance and other incentives. Housing finance agencies can help eligible homebuyers with a lower interest rate, help with your down payment, and provide other advantages. These non-profit agencies exist to promote community in particular places.

Research no-down and low-down mortgages.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a vital part in helping low and moderate-income individuals get mortgages. Part 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 would not be eligible for a conventional mortgage loan on their own, by providing mortgage insurance to private lenders. Interest rates with an FHA mortgage are normally the market interest rate, but the down payment requirements for an FHA mortgage will be lower than those of conventional loans. Closing costs may be financed in the mortgage, while the down payment might be as low as 3% of the total amount.

• VA loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists service people and veterans. This special loan does not require a down payment, has reduced closing costs, and offers a competitive interest rate. While the VA doesn't actually finance the mortgages, it does certify eligibility to apply for a VA mortgage.

• Piggy-back loans

  You can fund your down payment with a second mortgage that closes at the same time as the first. Most of the time, the piggyback loan takes care of 10 percent of the home's price, and the first mortgage finances 80 percent. Rather than the traditional 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  With a carry-back mortgage, the seller loans you part of his or her home equity. You would finance the majority of the purchase price with a traditional lending institution and borrow the remainder from the seller. Often, this form of second mortgage has a higher rate of interest.

Want to discuss your down payment? Give us a call at 3032282254.