Building Your Down Payment

Many people who would like to purchase a new home qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few straightforward ways to put together a down payment

Slash your budget and build up savings. Turn your budget upside-down to discover ways you can cut expenses to save for your down payment. Also, you can look into bank programs in which some of your paycheck is automatically deposited into a savings account each pay period. Some effective ways to build up funds include moving into a residence that is less expensive, and skipping your vacation for a year or two.

Sell items you do not need and get a part-time job. Perhaps you can find an additional job to get your down payment money. You can also get creative about the items you may be able to sell. You may own desirable items you can put up for sale at an online auction, or household items for a garage or tag sale. You can also explore what your investments will sell for.

Borrow from retirement funds. Explore the details of your individual plan. You may borrow funds from a 401(k) for you down payment or get a withdrawal from an IRA. You will need to ensure you know about any penalties, the effect this could have on your taxes, and repayment terms.

Ask for help from members of your family. First-time homebuyers are often fortunate enough to get help with their down payment help from caring family members who are anxious to help them get into their first home. Your family members may be inclined to help you reach the milestone of having your own home.

Contact housing finance agencies. These agencies provide special mortgage loans for moderate and low income borrowers, buyers with an interest in rehabilitating a house in a specific area, and additional groups as specified by each finance agency. Working through this type of agency, you can be given a below market interest rate, down payment help and other benefits. Housing finance agencies may assist you with a lower interest rate, help with your down payment, and offer other assistance. These non-profit agencies to promote the value of homes in certain places.

Explore no-down and low-down mortgage loans.

• Federal Housing Administration (FHA) mortgages

  The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in helping low and moderate-income families get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to private lenders, enabling new homebuyers who might not be eligible for a conventional mortgage loan, to obtain a mortgage. Interest rates for an FHA loan are usually the going interest rate, while the down payment requirements with an FHA mortgage are below those of conventional loans. Closing costs might be included in the mortgage, and your down payment may be as low as 3 percent of the purchase price.

• VA loans

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterens and service people. This specialized loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. Although the mortgage loans don't originate from the VA, the department certifies applicants by providing eligibility certificates.

• Piggy-back loans

  You may finance your down payment through a second mortgage that closes along with the first. In most cases the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. Instead of the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to lend you part of his own equity to help you get your down payment money. You would finance the majority of the purchase price with a traditional mortgage lender and finance the remainder with the seller. Typically you will pay a somewhat higher interest rate with the loan financed by the seller.

Need to talk about down payment options? Give us a call: 866-300-1550.