Putting Together Your Down Payment
Lots of borrowers qualify for a mortgage loan, but they can't afford a large down payment. Below are a few ways to get together your down payment
Slash your budget and build up savings. Turn your budget inside out to discover extra money to save for your down payment. Also, you can look into bank programs through which some of your take-home pay is automatically deposited into savings every pay period. You could look into some big expenses in your budget that you can give up, or trim, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay close to home for your annual vacation.
Work a second job and sell things you do not need. Try to find an additional job. This can be rough, but the temporary difficulty can help you get your down payment. In addition, you can make a comprehensive list of things you can sell. Unworn gold jewelry can bring a good price from local jewelry stores. A closetful of small items could add up to a nice sum at a garage or tag sale. You can also research what any investments you own could sell for.
Borrow money from your retirement plan. Check the provisions of your particular plan. It is possible to borrow funds from a 401(k) for you down payment or withdraw from an IRA. Make sure to learn about the tax consequences, your obligation for repayment, and any early withdrawal penalties.
Request a gift from your family. Many homebuyers are sometimes fortunate enough to receive down payment help from thoughtful family members who are anxious to help get them in their own home. Your family members may be inclined to help you reach the goal of owning your first home.
Research housing finance agencies. Special mortgate loan programs are provided to buyers in specific situations, like low income homebuyers or buyers planning to remodel houses in a targeted part of town, among others. With the help of this type of agency, you may receive an interest rate that is below market, down payment assistance and other incentives. These types of agencies can help eligible homebuyers with a reduced rate of interest, help with your down payment, and offer other assistance. The primary goal of non-profit housing finance agencies is boosting the purchase of homes in particular areas.
Find out about low-down and no-down mortgages.
- Federal Housing Administration (FHA) mortgages
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in assisting low to moderate-income buyers get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals in getting home financing.
FHA helps first-time homebuyers and others who might not be able to qualify for a conventional mortgage loan on their own, by providing mortgage insurance to the private lenders.
Interest rates with an FHA mortgage are typically the current interest rate, but the down payment amounts with an FHA loan are below those of conventional loans. The down payment may be as low as 3 percent and the closing costs could be financed in the mortgage.
- VA mortgage loans
VA loans are backed by the U.S. Department of Veterans Affairs. Service persons and veterans can get a VA loan, which typically offers a low fixed rate of interest, no down payment, and limited closing costs. While the VA does not actually issue the mortgage loans, it does certify eligibility to qualify for a VA loan.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close with the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.
- Carry-Back loans
In the option of a seller "carrying back a second mortgage," the seller loans you part of his or her equity. You would borrow the majority of the purchase price from a traditional mortgage lender and borrow the remaining amount from the seller. Usually you will pay a somewhat higher interest rate with the loan from the seller.
No matter your method of pulling together your down payment, the satisfaction of owning your own home will be just as sweet!
Need to talk about the best options for down payments? Call us at (773) 774-9040 Ext 121.