Building Your Down Payment
Lots of borrowers can easily qualify for various loan programs, but they can't afford a large down payment. Here are a few ideas:
Tighten your belt and save. Turn your budget upside-down to find ways you can cut expenses to go toward your down payment. You also might enroll in an automatic savings plan to automatically have a specific portion of your paycheck moved into savings. You might look into some big expenses in your spending history that you can live without, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or stay local for your family vacation.
Sell items you don't really need and get a part-time job. Try to find a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. Additionally, you can make a comprehensive list of items you can sell. Broken gold jewelry can bring a good price from local jewelers. Multiple small things can add up to a nice sum at a garage or tag sale. You can also explore what any investments you hold will bring if sold.
Borrow funds from a retirement plan. Investigate the parameters of your particular program. Many people get down payment money from withdrawing what they need from Individual Retirement Accounts or taking money out of 401(k) programs. Make sure you understand about any penalties, the effect this will have on taxes, and repayment obligation.
Request a gift from family. First-time buyers somtimes get down payment assistance from caring parents and other family members who may be eager to help them get into their own home. Your family members may be eager to help you reach the goal of owning your first home.
Learn about housing finance agencies. Provisional mortgage programs are extended to homebuyers in specific circumstances, such as low income homebuyers or buyers planning to renovating homes in a specific place, among others. Financing through this kind of agency, you probably will be given an interest rate that is below market, down payment help and other advantages. These kinds of agencies can assist eligible homebuyers with a reduced rate of interest, get you your down payment, and offer other assistance. These non-profit agencies exist to build up home ownership in specific neighborhoods.
Explore no-down and low-down mortgage loan programs.
- 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 helping low and moderate-income families get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get
FHA helps first-time homebuyers and others who might not be eligible for a typical mortgage loan by themselves, by providing mortgage insurance to the private lenders.
Down payment amounts for FHA loans are lower than those for conventional mortgages, even though these mortgages have current interest rates. Closing costs can be included in the mortgage, and your down payment could be as low as 3 percent of the total amount.
- VA mortgage loans
Guaranteed by the Department of Veterans Affairs, a VA loan qualifies veterens and service people. This specialized loan does not require a down payment, has mimimal closing costs, and provides the benefit of a competitive interest rate. Although the loans don't originate from the VA, the office certifies applicants by providing eligibility certificates.
- Piggy-back loans
You can fund your down payment using a second mortgage that closes at the same time as the first. Most of the time, the first mortgage covers 80% of the cost of the home and the "piggyback" is for 10%. The borrower covers the remaining 10%, instead of come up with the usual 20% down payment.
- Carry-Back loans
With a carry-back mortgage, the seller loans you part of his or her home equity. The buyer funds the highest percentage of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically you'll pay a somewhat higher rate with the loan from the seller.
The satisfaction will be the same, no matter which approach you use to pull together your down payment. Your new home will be your reward!
Want to discuss down payment options? Call us at (773) 774-9040 Ext 121.