Your Down Payment

Many borrowers can qualify for a mortgage loan, but they can't afford a large down payment. Want to buy a new house, but don't know how you should get together your down payment?

Reduce expenses and save. Look for ways to trim your monthly expenses to put away money for a down payment. You might also try enrolling in an automatic savings plan to automatically have a specific amount from your take-home pay moved into your savings account. Some practical ways to put together funds include moving into less expensive housing, and skipping your vacation for a year or two.

Work a second job and sell items you do not need. Perhaps you can get an additional job to get your down payment money. Additionally, you can put together a comprehensive inventory of items you can sell. Broken gold jewelry can bring a good amount from local jewelry stores. A closet full of small things might add up to a nice sum at a garage or tag sale. You could also explore what your investments will bring if sold.

Borrow your down payment from your retirement plan. Check the parameters of your specific program. You may borrow money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Be sure to ask your plan representative about the tax ramifications, your obligation for repayment, and possible penalties for withdrawing early.

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

Research housing finance agencies. Provisional mortgage loan programs are offered to homebuyers in certain situations, such as low income buyers or homebuyers planning to remodel homes in a targeted part of town, among others. Working through this kind of agency, you can receive an interest rate that is below market, down payment help and other advantages. Housing finance agencies may help eligible buyers with a reduced interest rate, get you your down payment, and offer other benefits. The central goal of non-profit housing finance agencies is promoting the purchase of homes in certain areas. 

Find out about low-down and no-down mortgage loans.  

• FHA mortgages   The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in assisting low to moderate-income families qualify for mortgages. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids homebuyers in getting mortgages. FHA provides mortgage insurance to the private lenders, enabling homebuyers who will not qualify for a typical mortgage loan, to get home financing. Down payment totals for FHA mortgages are sometimes lower than those for conventional mortgages.  The required down payment may go as low as 3.5% of the purchase price.  

• Conventional mortgages Fannie Mae and Freddie Mac offer low down payment mortgages and some offer reduced mortgage insurance for first time homebuyers which meet certain income criteria.

• VA loans VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA loan, which usually offers a competitive  interest rate, no down payment, and limited closing costs. Even though the loans don't originate from the VA, the office verifies borrowers by providing eligibility certificates.
• USDA loans USDA loans also known as Rural Development loans are zero down payment loans.  The borrower must meet certain income requirements and the home must be in a USDA eligible area.
• Piggy-back loans You can finance a down payment using a second mortgage that closes with the first. Generally the piggyback loan takes care of 10% of the purchase price, while the first mortgage covers 80%. Instead of the traditional 20% down payment, the homebuyer just has to pull together the remaining 10%.

• Carry-Back loans

  In the option of the seller "carrying back a second mortgage," the seller loans you part of his or her equity. The buyer finances the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Generally, this type of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter which strategy you use to come up with the down payment. Your new home will be your reward!

Want to discuss the best option for a down payment for you? Give us a call at 941-924-0044.