Putting Together Your Down Payment

Lots of borrowers can easily qualify for a loan, but they can't afford a large down payment. Start here

Cut expenses and save. Look for ways you can trim your monthly expenditures to set aside money for a down payment. You may also decide to enroll in an automatic savings plan at your bank to automatically have a specific portion of your paycheck transferred into savings. You could look into some big expenses in your spending history that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may decide to move into less expensive housing, or skip a vacation.

Sell things you do not really need and find a part-time job. Try to get an additional job. This can be rough, but the temporary trial can provide your down payment money. You can also seriously consider the possessions you really need and the things you can sell. You may own desirable items you can put up for sale at an auction website, or quality household items for a garage or tag sale. You could also look into what any investments you own will sell for.

Tap into your retirement funds. Investigate the parameters of your retirement program. You may take out money from a 401(k) plan for a down payment or get a withdrawal from an Individual Retirement Account. Make sure to find out about the tax consequences, your obligation for repaying the money, and any early withdrawal penalties.

Ask for assistance from generous members of your family. First-time buyers somtimes receive down payment assistance from giving family members who are prepared to help them get into their first home. Your family members may be inclined to help you reach the milestone of having your first home.

Contact housing finance agencies. These types of agencies offer special loan programs to low and moderate-income borrowers, buyers with an interest in remodeling a residence within a specific part of the city, and other groups as defined by each finance agency. Working through this kind of agency, you can get an interest rate that is below market, down payment assistance and other incentives. Housing finance agencies can assist eligible buyers with a reduced interest rate, help with your down payment, and provide other assistance. These non-profit agencies were established to build up home ownership in specific areas.

Learn about low-down and no-down mortgage loan programs.

• FHA mortgage loans

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a critical role in aiding low to moderate-income Americans get mortgage loans. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in qualifying for mortgages. FHA helps first-time buyers and others who may not be able to qualify for a typical mortgage on their own, by providing mortgage insurance to lenders. Interest rates for an FHA mortgage generally feature the current interest rate, while the down payment for an FHA loan will be below those of conventional loans. Closing costs may be included in the mortgage, while the down payment can be as low as 3% of the total.

• VA loans

  VA loans are backed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which typically offers a reasonable fixed rate of interest, no down payment, and reduced closing costs. Although the mortgages aren't actually issued by the VA, the department certifies applicants by providing eligibility certificates.

• Piggy-back loans

  You can finance your down payment with a second mortgage that closes with the first. Usually the piggyback loan is for 10 percent of the purchase amount, while the first mortgage covers 80 percent. Rather than the usual 20 percent down payment, the buyer will just have to pull together the remaining 10 percent.

• Carry-Back loans

  With a carry-back mortgage, the seller loans you part of his or her equity. The buyer finances the highest percentage of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Usually this type of second mortgage will have a higher rate of interest.

No matter your method of getting together your down payment, the satisfaction of living in your own home will be just as great!

Need to talk about the best options for down payments? Give us a call at 866-300-1550.