Building Your Down Payment
Lots of borrowers qualify for several different kinds of mortgages, but they can't afford a large down payment. Do you want to look into getting a new house, but aren't sure how you should put together a down payment?
Cut expenses and save. Be on the look-out for ways you can reduce your monthly expenditures to set aside money for a down payment. There are bank programs in which a portion of your paycheck is automatically placed into savings every pay period. Some practical methods to build up funds include moving into housing that is less expensive, and skipping your vacation for a year or two.
Sell items you don't really need and get a second job. Look for an additional job. This can be exhausting, but the temporary trial can help you get your down payment. You can also get creative about the items you can put up for sale. A closetful of small things may add up to a nice sum at a garage or tag sale. You might also explore what any investments you own will bring if sold.
Tap into retirement funds. Research the details for your individual plan. Some people get down payment money from withdrawing funds from their IRAs or borrowing from their 401(k) plans. Be sure you comprehend the tax consequences, your obligation for repayment, and possible early withdrawal penalties.
Ask for assistance from generous family members. Many buyers are often lucky enough to receive help with their down payment help from giving parents and other family members who may be prepared to help get them in their first home. Your family members may be inclined to help you reach the goal of having your first home.
Contact housing finance agencies. Provisional loan programs are extended to buyers in specific situations, such as low income homebuyers or future homeowners looking to renovating homes in a certain part of town, among others. With the help of a housing finance agency, you may receive a below market interest rate, down payment help and other incentives. These kinds of agencies can help you with a reduced rate of interest, help with your down payment, and provide other assistance. These non-profit agencies were established to promote the value of homes in specific areas.
Learn about low-down and no-down mortgage loan programs.
- Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in assisting low to moderate-income buyers get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in qualifying for mortgage loans.
FHA provides mortgage insurance to the private lenders, enabling new homebuyers who will not be eligible for a traditional mortgage, to receive financing.
Interest rates with an FHA mortgage typically feature the current interest rate, but the down payment with an FHA loan are smaller than those of conventional loans. Closing costs can be financed in the mortgage, while your down payment may be as low as 3 percent of the total amount.
- VA mortgages
VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can benefit from a VA loan, which typically offers a reasonable fixed rate of interest, no down payment, and limited closing costs. Although the loans don't originate from the VA, the department certifies borrowers by providing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close along with the first. Generally the first mortgage is for 80% of the purchase price and the "piggyback" funds 10%. The borrower pays the remaining 10%, rather than having to pull together the usual 20% down payment.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to loan you a portion of his home equity to help you get your down payment funds. You would borrow the largest portion of the purchase price from a traditional mortgage lender and finance the remaining amount with the seller. Often, this kind of second mortgage has 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 brand new home will be well worth it!
Want to discuss down payment options? Call us: (773) 774-9040 Ext 121.