Building Your Down Payment
Lots of people who are looking to purchase a new house can qualify for a mortgage loan, but they don't have a lot of cash to pay a down payment. Here are a few ways to put together your down payment
Slash your budget and build up savings. Scrutinize your budget to find ways you can cut expenses to go toward your down payment. You also might enroll in an automatic savings plan at your bank to have a percentage of your payroll automatically deposited into your savings account. Some practical strategies to save additional funds include moving into housing that is less expensive, and skipping your family vacation for a year or two.
Work a second job and sell items you do not need. Maybe you can get an additional job to get your down payment money. You can also get creative about the things you may be able to put up for sale. Multiple small things might add up to a fair amount at a garage or tag sale. You can also look into what your investments could bring if sold.
Tap into your retirement funds. Research the details of your individual plan. Many people get down payment money from withdrawing funds from their IRAs or taking money out of 401(k) programs. Make sure you know about any penalties, the way this may affect on your income taxes, and repayment terms.
Ask for help from family members. Many buyers somtimes receive down payment assistance from caring parents and other family members who may be prepared to help them get into their own home. Your family members may be pleased at the chance to help you reach the goal of buying your first home.
Learn about housing finance agencies. These types of agencies provide provisional mortgage programs for low and moderate-income buyers, buyers interested in rehabilitating a house within a targeted part of the city, and other groups as specified by each finance agency. Working through a housing finance agency, you may get a below market interest rate, down payment assistance and other perks. Housing finance agencies may assist eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other advantages. The central mission of not-for-profit housing finance agencies is to boost the purchase of homes in specific places.
Find out about low-down and no-down mortgage loan programs.
- FHA loans
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in assisting low and moderate-income families qualify for mortgages. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who wish to get mortgage loans.
FHA offers mortgage insurance to private lenders, enabling new homebuyers who will not be eligible for a conventional mortgage, to receive a mortgage.
Interest rates for an FHA mortgage normally feature the going interest rate, while the down payment requirements for an FHA mortgage will be less than those of conventional loans. Closing costs may be financed in the mortgage, and your down payment could be as low as 3% of the purchase price.
- VA loans
With a guarantee from the Department of Veterans Affairs, a VA loan is offered to service people and veterans. This particular loan requires no down payment, has mimimal closing costs, and provides a competitive rate of interest. Even though the loans don't originate from the VA, the department certifies borrowers by issuing eligibility certificates.
- Piggy-back loans
You may fund your down payment with a second mortgage that closes with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. The borrower covers the remaining 10%, instead of putting the usual 20% down payment.
- Carry-Back loans
In a "carry back" situation, the seller commits to lend you a piece of his own equity to help you get your down payment money. In this scenario, you would finance the largest portion of the purchase price with a traditional mortgage lender and borrow the remaining amount from the seller. Typically, this kind of second mortgage has higher interest.
The satisfaction will be the same, no matter which method you use to put together the down payment. Your brand new home will be your reward!
Need to talk about the best options for down payments? Call us at (773) 774-9040 Ext 121.