Building Your Down Payment

Many borrowers qualify for various loan programs, but they can't afford a large down payment. Here are a few straightforward ways to put together a down payment

Tighten your belt and save. Be on the look-out for ways to reduce your expenditures to set aside funds for a down payment. There are bank programs through which some of your take-home pay is automatically deposited into a savings account each pay period. Some effective approaches to save additional funds include moving into a residence that is less expensive, and staying local for your vacation for a year or two.

Work more and sell things you do not need. Perhaps you can get a second job to get your down payment money. You can also get serious about the possessions you really need and the things you may be able to put up for sale. A closetful of small things can add up to a fair amount at a garage or tag sale. Also, you might want to consider selling any investments you own.

Borrow funds from your retirement plan. Research the details for your particular plan. Some people get down payment money by withdrawing from their IRAs or borrowing from their 401(k) plans. Make sure you understand the tax ramifications, your obligation for repayment, and possible penalties for withdrawing early.

Ask for assistance from members of your family. Many buyers are sometimes fortunate enough to get help with their down payment help from thoughtful family members who are anxious to help them get into their own home. Your family members may be pleased to help you reach the goal of having your first home.

Contact housing finance agencies. These types of agencies provide special mortgate loan programs to low and moderate-income buyers, buyers with an interest in remodeling a home in a targeted part of the city, and other particular kinds of buyers as specified by each agency. With the help of a housing finance agency, you probably will get a below market interest rate, down payment help and other advantages. Housing finance agencies may assist eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other assistance. These non-profit agencies to build up home ownership in certain neighborhoods.

Find out about low-down and no-down mortgage loan programs.

• Federal Housing Administration (FHA) mortgage loans

  The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays an important role in aiding low to moderate-income individuals get mortgage loans. Part of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) assists individuals in getting mortgage loans. FHA offers mortgage insurance to private lenders, helping the buyers to become eligible for financing. Down payment requirements for FHA loans are below those of typical mortgages, even though these mortgages come with current rates of interest. The required down payment can be as low as three percent and the closing costs could be covered by the mortgage.

• VA mortgages

  VA loans are backed by the Department of Veterans Affairs. Veterens and service people can get a VA loan, which generally offers a competitive interest rate, no down payment, and minimal closing costs. Although the VA doesn't actually issue the loans, it does issue a certificate of eligibility to apply for a VA mortgage.

• Piggy-back loans

  You can fund your down payment using a second mortgage that closes along with the first. Usually the piggyback loan takes care of 10 percent of the purchase amount, and the first mortgage covers 80 percent. The homebuyer pays the remaining 10%, instead of putting the usual 20% down payment.

• Carry-Back loans

  In a "carry back" agreement, the seller agrees to loan you a portion of his home equity to help you get your down payment funds. The buyer finances most of the purchase price with a traditional mortgage program and finances the remaining funds with the seller. Typically, this kind of second mortgage will have higher interest.

Need to talk about down payment options? Give us a call at 949-235-3507.