Building Your Down Payment

Many people who are looking to buy a new house qualify for various loan programs, but they don't have much to put up a down payment. Want to look into getting a new house, but aren't sure how you should get together a down payment?

Cut expenses and save. Be on the look-out for ways to reduce your monthly expenses to set aside funds for a down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically transferred into savings each pay period. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or stay local for your family vacation.

Work a second job and sell things you don't need. Perhaps you can get a second job to get your down payment money. You can also get serious about the possessions you actually need and the items you can sell. Maybe you have desirable items you can sell on an online auction, or quality household goods for a tag or garage sale. You might also explore what your investments will sell for.

Borrow your down payment from a retirement plan. Investigate the parameters of your retirement program. You may borrow funds from a 401(k) for a down payment or withdraw from an IRA. You will want to ensure you are clear about any penalties, the effect this could have on income taxes, and repayment obligation.

Request a generous gift from your family. First-time homebuyers are often fortunate enough to receive help with their down payment help from gracious family members who may be able to help get them in their first home. Your family members may be happy at the chance to help you reach the milestone of having your own home.

Research housing finance agencies. Special loan programs are offered to buyers in certain circumstances, such as low income homebuyers or future homeowners planning to renovating houses in a certain area, among others. Financing through this type of agency, you can be given an interest rate that is below market, down payment help and other perks. These types of agencies can assist eligible buyers with a lower rate of interest, help with your down payment, and offer other advantages. The primary mission of not-for-profit housing finance agencies is boosting home ownership in specific parts of the city.

Learn about low-down and no-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 a vital part in aiding low and moderate-income buyers qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals who wish to get mortgages. FHA offers mortgage insurance to the private lenders, enabling homebuyers who might not be eligible for a typical loan, to get home financing. Down payment amounts for FHA mortgages are lower than those of typical mortgage loans, although these mortgages come with average rates of interest. The required down payment may be as low as three percent and the closing costs may be covered by the mortgage loan.

• VA mortgage loans

  VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which generally offers a competitive rate of interest, no down payment, and limited closing costs. While the 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 closes with the first. Most of the time, the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. Rather than the usual 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  We a seller carries back a second mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would finance the majority of the purchase price with a traditional lending institution and borrow the remaining amount from the seller. Generally, this form of second mortgage will have higher interest.

Want to discuss down payment options? Give us a call at 866-300-1550.