Building Your Down Payment

Lots of borrowers can qualify for a loan, but they can't afford a large down payment. Below are a few ways to put together a down payment

Tighten your belt and save. Be on the look-out for ways you can reduce your expenses to save toward a down payment. There are bank programs in which a portion of your take-home pay is automatically transferred into savings every pay period. You would be wise to look into some big expenses in your spending history that you can do without, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or skip a vacation.

Work more and sell items you do not need. Maybe you can find a second job and save your earnings. You can also seriously consider the possessions you actually need and the items you migh be able to sell. Maybe you have collectibles you can put up for sale on an auction website, or quality household items for a tag or garage sale. Also, you can look into selling any investments you hold.

Borrow from your retirement funds. Research the details of your individual plan. It is possible to take out funds from a 401(k) plan for a down payment or get a withdrawal from an IRA. Be sure you know about any penalties, the effect this could have on your taxes, and repayment obligation.

Ask for a gift from family. First-time homebuyers somtimes get down payment assistance from caring parents and other family members who are prepared to help get them in their first home. Your family members may be eager to help you reach the milestone of buying your own home.

Contact housing finance agencies. Provisional mortgage programs are given to buyers in specific situations, such as low income homebuyers or buyers planning to improve homes in a specific area, among others. With the help of a housing finance agency, you may be given an interest rate that is below market, down payment assistance and other advantages. Housing finance agencies can help eligible homebuyers with a lower rate of interest, help with your down payment, and offer other benefits. These non-profit agencies were established to promote home ownership in particular neighborhoods.

Explore no-down and low-down mortgages.

• 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 an important role in assisting low to moderate-income families qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgages. FHA offers mortgage insurance to private lenders, enabling homebuyers who might not be eligible for a typical mortgage loan, to get financing. Down payment requirements for FHA loans are below those with typical mortgages, even though these mortgages have average rates of interest. Closing costs can be covered by the mortgage, and the down payment might be as low as 3 percent of the total.

• 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 a competitive rate of interest. Even though the mortgages don't originate from the VA, the office certifies applicants by issuing eligibility certificates.

• Piggy-back loans

  A piggy-back loan is a second mortgage that closes along with the first. Generally the piggyback loan is for 10 percent of the purchase price, while the first mortgage finances 80 percent. In contrast to the usual 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  In a "carry back" situation, the seller commits to loan you some of his own equity to help you with your down payment funds. The buyer funds most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Often, this type of second mortgage will have higher interest.

No matter how you gather your down payment, the satisfaction of reaching the goal of living in your own home will be just as great!

Need to talk about the best options for down payments? Call us: (760) 943-7200.