Building Your Down Payment

Lots of folks who are looking to buy a new house can qualify for a loan, but they can't afford a large down payment. Here's where to get started

Slash the budget and build up savings. Be on the look-out for ways you can trim your expenditures to set aside funds for a down payment. Also, you can look into bank programs in which some of your paycheck is automatically deposited into savings each pay period. You might look into some big expenses in your spending history that you can give up, or trim, at least temporarily. For example, you may move into less expensive housing, or stay local for your annual vacation.

Sell items you do not need and find a second job. Look for an additional job. This can be exhausting, but the temporary trial can help you get your down payment. In addition, you can put together an exhaustive list of items you may be able to sell. Broken gold jewelry can bring a good amount from local jewelers. A closetful of small things can add up to a nice sum at a garage or tag sale. Also, you can think about selling any investments you hold.

Tap into your retirement funds. Research the details of your particular plan. You may take out money from a 401(k) plan for a down payment or withdraw from an Individual Retirement Account. Make sure to learn about the tax consequences, your obligation for repayment, and penalties for withdrawing early.

Ask for a gift from your family. Many homebuyers are often lucky enough to get help with their down payment help from giving family members who may be able to help get them in their first home. Your family members may be pleased at the chance to help you reach the goal of having your own home.

Contact housing finance agencies. These agencies offer special mortgage programs for low and moderate-income buyers, buyers with an interest in remodeling a home within a targeted area, and additional groups as specified by each agency. With the help of this kind of agency, you can receive a below market interest rate, down payment help and other advantages. Housing finance agencies can help eligible buyers with a reduced interest rate, get you your down payment, and provide other assistance. These non-profit agencies exist to promote home ownership in particular places.

Find out about low-down and no-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which is inside the U.S. Department of Housing and Urban Development (HUD), plays a vital part in assisting low to moderate-income individuals get mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists homebuyers in getting home financing. FHA provides mortgage insurance to the private lenders, ensuring the buyers are eligible for a mortgage loan. Interest rates with an FHA loan are normally the going interest rate, while the down payment amounts for an FHA mortgage will be lower than those of conventional loans. The down payment may be as low as 3 percent and the closing costs might be covered by the mortgage loan.

• VA mortgages

  With a guarantee from the Department of Veterans Affairs, a VA loan assists veterens and service people. This particular loan does not require a down payment, has reduced closing costs, and provides the benefit of a competitive interest rate. While the VA does not issue the mortgage loans, it does issue a certificate of eligibility to apply for a VA loan.

• Piggy-back loans

  You may finance a down payment with a second mortgage that closes with the first. Usually the piggyback loan is for 10 percent of the home's price, while the first mortgage covers 80 percent. Rather than 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 commits to loan you a piece of his own equity to help you get your down payment money. The buyer funds 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 higher interest.

Need to talk about down payments? Give us a call at 5102009714.