Building Your Down Payment

Many buyers can easily qualify for several different kinds of mortgages, but they don't have a lot of cash to put up the standard down payment. Want to look into getting a new house, but don't know how you should get together your down payment?

Reduce expenses and save. Be on the look-out for ways to reduce your expenses to put away money for a down payment. There are bank programs in which some of your take-home pay is automatically deposited into savings each pay period. You would be wise to look into some big expenses in your spending history that you can do without, or reduce, 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 do not need and find a second job. Maybe you can get a second job to get your down payment money. In addition, you can make a comprehensive inventory of items you may be able to sell. Unworn gold jewelry can be sold at local jewelry stores. You may have collectibles you can put up for sale on an online auction, or household goods for a tag or garage sale. Also, you can consider selling any investments you own.

Borrow from a retirement plan. Check the provisions of your particular plan. You may take out money from a 401(k) plan for a down payment or perform a withdrawal from an IRA. Make sure you comprehend the tax ramifications, repayment terms, and any penalties for withdrawing early.

Ask for assistance from generous members of your family. Many buyers are sometimes lucky enough to get help with their down payment help from caring parents and other family members who may be able to help get them in their own home. Your family members may be pleased to help you reach the milestone of buying your own home.

Contact housing finance agencies. These agencies extend provisional loan programs to low and moderate-income buyers, buyers interested in rehabilitating a house within a targeted part of the city, and additional groups as defined by the agency. With the help of a housing finance agency, you may be given an interest rate that is below market, down payment assistance and other advantages. Housing finance agencies can help you with a reduced rate of interest, get you your down payment, and provide other benefits. The primary goal of not-for-profit housing finance agencies is to promote the purchase of homes in particular parts of the city.

Research no-down and low-down mortgages.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income families get mortgage loans. 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, enabling homebuyers who might not qualify for a conventional mortgage loan, to get financing. Interest rates with an FHA mortgage are typically the market interest rate, but the down payment for an FHA loan are less than those of conventional loans. The down payment may be as low as three percent and the closing costs could be financed in the mortgage.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This special loan requires no down payment, has reduced closing costs, and provides a competitive interest rate. While the VA does not actually finance the mortgage loans, it does issue a certificate of eligibility to qualify for a VA mortgage.

  • Piggy-back loans

    You may finance a down payment using a second mortgage that closes at the same time as the first. Usually the piggyback loan is for 10 percent of the purchase amount, while the first mortgage finances 80 percent. In contrast to the traditional 20 percent down payment, the homebuyer will just have to cover the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to loan you some of his own equity to assist you with your down payment money. You would finance the largest portion of the purchase price with a traditional lender and borrow the remaining amount from the seller. Typically you'll pay a slightly higher interest rate with the loan financed by the seller.

The satisfaction will be the same, no matter how you manage to get together your down payment. Your new home will be your reward!

Want to discuss the best options for down payments? Give us a call at (203) 729-6681.

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