Putting Together Your Down Payment

Lots of borrowers qualify for several different kinds of mortgages, but they don't have a lot of money to put up a down payment. Here's where you start

Slash the budget and build up savings. Look for ways you can reduce your monthly expenditures to set aside funds for a down payment. You might also try enrolling in an automatic savings plan to automatically have a specific portion of your paycheck transferred into a savings account. Some practical ways to build up funds include moving into a residence that is less expensive, and staying home for your vacation for a year or two.

Sell items you don't need and find a part-time job. Try to get a second job. This can be exhausting, but the temporary trial can help you get your down payment. Additionally, you can make a comprehensive inventory of items you can sell. Broken gold jewelry can be sold at local jewelers. Maybe you own collectibles you can put up for sale at an auction website, or quality household items for a garage or tag sale. Also, you might want to think about selling any investments you hold.

Borrow funds from a retirement plan. Explore the details of your particular plan. Many homebuyers get down payment money by withdrawing funds from IRAs or borrowing from their 401(k) plans. Be sure you understand the tax ramifications, repayment terms, and any early withdrawal penalties.

Ask for help from generous members of your family. First-time homebuyers are sometimes fortunate enough to get help with their down payment assistance from gracious family members who may be eager to help them get into their first home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.

Contact housing finance agencies. Special mortgage programs are given to buyers in certain circumstances, like low income purchasers or future homeowners planning to remodel houses in a certain place, among others. Financing through this type of agency, you probably will get a below market interest rate, down payment assistance and other incentives. These types of agencies may assist you with a lower interest rate, get you your down payment, and offer other advantages. The primary goal of not-for-profit housing finance agencies is to promote residence ownership in particular places.

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

• 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 significant part in helping low and moderate-income families 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 offers mortgage insurance to the private lenders, enabling homebuyers who will not qualify for a typical mortgage, to obtain a mortgage. Interest rates for an FHA mortgage are usually the going interest rate, but the down payment requirements with an FHA mortgage will be less than those of conventional loans. The down payment may be as low as 3 percent and the closing costs might be included in the mortgage loan.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This specialized loan does not require a down payment, has reduced closing costs, and provides the advantage of a competitive interest rate. Although the VA does not actually provide the mortgage loans, it does issue a certificate of eligibility to qualify for a VA loan.

• Piggy-back loans

  You can finance a down payment with a second mortgage that closes at the same time as the first. Usually the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the homebuyer just has to cover the remaining 10 percent.

• Carry-Back loans

  In a "carry back" agreement, the seller commits to lend you some of his own equity to help you get your down payment funds. The buyer funds the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically you will pay a somewhat higher interest rate on the loan financed by the seller.

No matter your strategy of pulling together your down payment money, the satisfaction of reaching the goal of owning your own home will be just as great!

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