Building Your Down Payment
Many borrowers can easily qualify for several different kinds of mortgages, but they don't have a lot of money to put up a down payment. Start here
Slash your budget and build up savings. Be on the look-out for ways you can reduce your monthly expenditures to set aside funds for a down payment. You might also try enrolling in an automatic savings plan to automatically have a predetermined portion of your paycheck transferred into savings. Some practical methods to save additional funds include moving into a residence that is less expensive, and staying home for your vacation for a year or two.
Work a second job and sell items you don't need. Try to get an additional job. This can be rough, but the temporary difficulty can help you get your down payment. You can also get serious about the possessions you really need and the things you can put up for sale. Multiple small things could add up to a fair amount at a garage or tag sale. You could also research what any investments you own will sell for.
Tap into your retirement funds. Investigate the parameters of your particular program. You can borrow funds from a 401(k) plan for a down payment or withdraw from an IRA. Be sure you understand the tax ramifications, repayment terms, and possible penalties for withdrawing early.
Ask for assistance from members of your family. Many buyers are sometimes lucky enough to receive down payment assistance from thoughtful parents and other family members who may be able to help them get into their own home. Your family members may be willing to help you reach the milestone of owning your own home.
Learn about housing finance agencies. Special mortgage loans are given to buyers in specific situations, like low income homebuyers or homebuyers looking to renovating homes in a specific neighborhood, among others. With the help of this type of agency, you may be given a below market interest rate, down payment help and other incentives. Housing finance agencies can assist eligible homebuyers with a lower rate of interest, get you your down payment, and provide other benefits. These non-profit programs were established to build up community in specific neighborhoods.
Research no-down and low-down mortgages.
- FHA loans
The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important part in aiding low to moderate-income buyers qualify for mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get
FHA helps first-time buyers and others who may not be able to qualify for a typical mortgage loan on their own, by offering mortgage insurance to lenders.
Interest rates with an FHA loan generally feature the current interest rate, but the down payment amounts with an FHA mortgage are smaller than those of conventional loans. Closing costs may be financed within the mortgage, and the down payment may be as low as 3 percent of the purchase price.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This special loan does not require a down payment, has limited closing costs, and provides the advantage of a competitive rate of interest. Even though the VA doesn't provide the mortgage loans, it does certify eligibility to apply for a VA loan.
- Piggy-back loans
You can finance your down payment through a second mortgage that closes along with the first. Generally the first mortgage covers 80% of the cost of the home and the "piggyback" funds 10%. The homebuyer covers the remaining 10%, instead of needing to put together the typical 20% down payment.
- Carry-Back loans
In the option of a seller "carrying back a second mortgage," the seller loans you part of his or her equity. In this scenario, you would finance the largest portion of the purchase price with a traditional lender and finance the remainder with the seller. Typically 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!
Want to discuss down payment options? Call us: (773) 774-9040 Ext 121.