Building Your Down Payment

Lots of buyers qualify for various loan programs, but they can't afford a large down payment. Here are a few ideas:

Slash your budget and build up savings. Turn your budget inside out to discover ways you can cut expenses to save for your down payment. There are bank programs in which a specific portion of your paycheck is automatically placed into savings every pay period. You could look into some big expenses in your budget 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 close to home for your annual vacation.

Sell things you don't need and find a second job. Perhaps you can get an additional job and build up your earnings. You can also get creative about the items you may be able to sell. Multiple small items may add up to a fair amount at a garage or tag sale. Also, you might want to think about selling any investments you own.

Tap into retirement funds. Investigate the provisions of your specific plan. Some homebuyers get down payment money by withdrawing from their IRAs or pulling funds out of their 401(k) programs. Be sure you understand the tax ramifications, repayment terms, and possible early withdrawal penalties.

Ask for help from generous members of your family. Many homebuyers are often lucky enough to get down payment help from giving parents and other family members who are willing to help them get into their first home. Your family members may be happy at the chance to help you reach the goal of buying your first home.

Contact housing finance agencies. These types of agencies provide provisional mortgate loan programs to low and moderate-income homebuyers, buyers with an interest in sprucing up a home in a particular area, and other specific kinds of buyers as specified by each finance agency. With the help of this kind of agency, you may receive a below market interest rate, down payment assistance and other benefits. These kinds of agencies may help you with a reduced rate of interest, help with your down payment, and offer other assistance. The central mission of not-for-profit housing finance agencies is boosting the purchase of homes in particular areas.

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 an important part in helping low to moderate-income families qualify for mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA offers mortgage insurance to private lenders, ensuring the buyers are eligible for a mortgage loan. Interest rates with an FHA loan are generally the market interest rate, while the down payment with an FHA mortgage are lower than those of conventional loans. The down payment may go as low as three percent and the closing costs might be packaged in the mortgage.

• VA mortgages

  VA loans are backed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a competitive fixed rate of interest, no down payment, and minimal closing costs. While the VA doesn't actually finance the mortgage loans, it does issue a certificate of eligibility to qualify for a VA loan.

• Piggy-back loans

  You can fund a down payment using a second mortgage that closes along with the first. In most cases the first mortgage covers 80% of the purchase price 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

  In a "carry back" situation, the seller agrees to lend you a portion of his home equity to assist you with your down payment money. You would finance the majority of the purchase price with a traditional lender and finance the remaining amount with the seller. Typically, this form of second mortgage will have a higher rate of interest.

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

Want to discuss your down payment? Give us a call at 702-524-1376.