Putting Together Your Down Payment

Many buyers can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Do you want to look into getting a new home, but aren't sure how you should get together your down payment?

Tighten your belt and save. Scrutinize the budget to find extra money to save for your down payment. There are bank programs in which a specific portion of your paycheck is automatically deposited into a savings account every pay period. You could look into some big expenses in your spending history that you can live without, or trim, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work a second job and sell items you don't need. Perhaps you can find an additional job to get your down payment money. In addition, you can put together a comprehensive list of things you can sell. Unworn gold jewelry can be sold at local jewelers. Multiple small things might add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you own.

Borrow funds from a retirement plan. Investigate the provisions of your particular program. Some homebuyers get down payment money from withdrawing what they need from IRAs or borrowing from their 401(k) programs. Make sure you comprehend the tax consequences, your obligation for repayment, and penalties for withdrawing early.

Ask for a gift from your family. Many buyers somtimes get help with their down payment assistance from thoughtful parents and other family members who are prepared to help get them in their own home. Your family members may be willing to help you reach the milestone of having your first home.

Research housing finance agencies. These types of agencies provide special loan programs for moderate and low income buyers, buyers with an interest in renovating a house in a targeted area, and other groups as specified by each agency. With the help of this type of agency, you can be given an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies may help eligible buyers with a reduced interest rate, get you your down payment, and offer other benefits. The principal purpose of not-for-profit housing finance agencies is promoting residential ownership in targeted parts of the city.

Research no-down and low-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in aiding low and moderate-income Americans qualify for mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for financing. Interest rates for an FHA mortgage are usually the market interest rate, while the down payment for an FHA loan will be lower than those of conventional loans. The required down payment can go as low as three percent and the closing costs might be covered by the mortgage loan.

• VA loans

  VA loans are guaranteed by the U.S. Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a competitive fixed interest rate, no down payment, and limited closing costs. While the loans don't originate from the VA, the department certifies borrowers by issuing eligibility certificates.

• Piggy-back loans

  You can fund your down payment with a second mortgage that closes at the same time as the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, rather than having to pull together the typical 20% down payment.

• Carry-Back loans

  In a "carry back" mortgage, the seller agrees to lend you a piece of his home equity to help you with your down payment money. You would borrow the majority of the purchase price from a traditional mortgage lending institution and finance the remainder with the seller. Typically you'll pay a somewhat higher interest rate with the loan financed by the seller.

Need to talk about down payments? Call us at 866-300-1550.