Building Your Down Payment
Many buyers can easily qualify for a loan, but they can't afford a large down payment. Below are a few straightforward methods that will help you put together your down payment
Slash your budget and build up savings. Scrutinize your budget to discover ways you can cut expenses to save for your down payment. You might also try enrolling in an automatic savings plan at your bank to automatically have a specific portion of your paycheck moved into your savings account. You might look into some big expenses in your budget that you can live without, or trim, at least temporarily. For example, you might decide to move into less expensive housing, or stay local for your family vacation.
Work more and sell items you do not need. Look for an additional job. This can be rough, but the temporary trial can provide your down payment money. You can also get serious about the possessions you actually need and the things you can sell. You may have desirable items you can put up for sale on an auction website, or household items for a garage or tag sale. You can also research what your investments could bring if sold.
Tap into your retirement funds. Research the specifics of your individual plan. You may borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure to find out about the tax consequences, your obligation for repayment, and any early withdrawal penalties.
Ask for assistance from members of your family. First-time homebuyers are sometimes fortunate enough to receive down payment assistance from gracious parents and other family members who may be eager to help them get into their own home. Your family members may be pleased to help you reach the milestone of buying your first home.
Contact housing finance agencies. These types of agencies provide provisional mortgage loans to moderate and low income buyers, buyers with an interest in renovating a home within a targeted part of the city, and other groups as defined by each agency. Financing through a housing finance agency, you probably will be given a below market interest rate, down payment assistance and other advantages. Housing finance agencies can assist you with a lower interest rate, help with your down payment, and provide other assistance. These non-profit agencies exist to promote home ownership in particular areas.
Find out about low-down and no-down mortgage loan programs.
- 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 to moderate-income individuals get mortgages. Part of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgage loans.
FHA aids first-time homebuyers and others who would not be eligible for a traditional mortgage loan on their own, by providing mortgage insurance to lenders.
Interest rates for an FHA loan are usually the going interest rate, but the down payment requirements for an FHA mortgage will be below those of conventional loans. The required down payment can be as low as 3 percent and the closing costs could be included in the mortgage loan.
- VA mortgages
With a guarantee from the Department of Veterans Affairs, a VA loan qualifies service people and veterans. This particular loan does not require a down payment, has limited closing costs, and offers a competitive interest rate. Although the mortgages don't originate from the VA, the department certifies borrowers by providing eligibility certificates.
- Piggy-back loans
You can fund your down payment with a second mortgage that closes at the same time as the first. In most cases the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. The borrower covers the remaining 10%, rather than come up with the typical 20% down payment.
- Carry-Back loans
With a carry-back mortgage, the you borrow a portion of the seller's home equity.. The buyer finances most of the purchase price with a traditional mortgage program and borrows the remainder from the seller. Usually you'll pay a slightly higher interest rate on the loan from the seller.
The satisfaction will be the same, no matter which strategy you use to put together the down payment. Your new home will be your reward!
Want to discuss the best options for down payments? Call us: 952 417 8481.