Putting Together Your Down Payment

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Lots of people who are looking to buy a new house qualify for various loan programs, but they don't have a large sum of cash to pay the standard down payment. Here are a few ways to get together your down payment

Slash the budget and build up savings. Be on the look-out for ways you can reduce your expenditures to put away money for a down payment. Also, you can look into bank programs in which a specific portion of your take-home pay is automatically placed into savings each pay period. You would be wise to look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. For example, you may decide to move into less expensive housing, or skip a family vacation.

Sell things you don't really need and get a second job. Maybe you can get an additional job to get your down payment money. In addition, you can put together a comprehensive list of items you can sell. Unused gold jewelry can bring a good price from local jewelers. A closet full of small items could add up to a nice sum at a garage or tag sale. Also, you might want to look into selling any investments you own.

Borrow your down payment from your retirement plan. Research the details for your individual plan. Some people get down payment money by withdrawing what they need from their Individual Retirement Accounts or getting funds out of 401(k) programs. Make sure you are clear about any penalties, the effect this will have on taxes, and repayment obligation.

Request a generous gift from family. Many buyers are sometimes lucky enough to receive help with their down payment help from giving parents and other family members who may be willing to help them get into their own home. Your family members may be willing to help you reach the goal of buying your first home.

Research housing finance agencies. Special mortgage loan programs are extended to homebuyers in certain situations, like low income homebuyers or future homeowners looking to improve houses in a targeted area, among others. With the help of this kind of agency, you probably will get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can help eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other advantages. These non-profit programs to build up the value of homes in certain places.

Learn about low-down and no-down mortgage loan programs.

• 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 helping low and moderate-income Americans qualify for mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time homebuyers and others who may not be able to qualify for a traditional loan on their own, by offering mortgage insurance to lenders. Down payment totals for FHA mortgages are lower than those for traditional mortgage loans, although these loans have average rates of interest. Closing costs may be covered by the mortgage, and the down payment can be as low as 3 percent of the total amount.

• VA mortgage loans

  With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan requires no down payment, has minimal closing costs, and provides the advantage of a competitive rate of interest. Even though the VA doesn't provide the mortgages, it does certify eligibility to qualify for a VA mortgage.

• Piggy-back loans

  A piggy-back loan is a second mortgage that you close at the same time as the first. Most of the time, the piggyback loan is for 10 percent of the purchase price, while the first mortgage covers 80 percent. The homebuyer pays the remaining 10%, rather than come up with the typical 20% down payment.

• Carry-Back loans

  In a "carry back" situation, the seller agrees to loan you part of his home equity to help you get your down payment funds. The buyer finances most of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Typically, this form of second mortgage will have a higher rate of interest.

No matter your strategy of getting together your down payment, the thrill of reaching the goal of living in your own home will be just as great!

Want to discuss down payments? Call us at 410.461.4043.