Your Down Payment
Many people who are looking to buy a new house qualify for several different kinds of mortgages, but they can't afford a large down payment. Here are a few straightforward ways to get together a down payment
Slash your budget and build up savings. Be on the look-out for ways to trim your expenses to save toward a down payment. Also, you can look into bank programs through which a specific portion of your paycheck is automatically placed into savings each pay period. You could look into some big expenses in your spending history that you can live without, or trim, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or stay local for your vacation.
Sell items you don't need and find a part-time job. Perhaps you can find a second job and build up your earnings. You can also get creative about the things you migh be able to sell. Multiple small items might add up to a fair amount at a garage or tag sale. You could also explore what any investments you hold could bring if sold.
Borrow from a retirement plan. Research the specifics of your particular plan. Some homebuyers get down payment money by withdrawing funds from their Individual Retirement Accounts or borrowing from 401(k) plans. Be sure to find out about the tax consequences, repayment terms, and penalties for withdrawing early.
Request a generous gift from family. Many homebuyers somtimes receive help with their down payment assistance from gracious family members who may be eager to help get them in their first home. Your family members may be inclined to help you reach the goal of owning your own home.
Contact housing finance agencies. These agencies offer provisional mortgage loans for low and moderate-income homebuyers, buyers interested in renovating a home in a specific area, and additional particular kinds of buyers as specified by each finance agency. Financing through this type of agency, you probably will receive a below market interest rate, down payment assistance and other incentives. Housing finance agencies may help eligible homebuyers with a reduced rate of interest, get you your down payment, and provide other advantages. These non-profit agencies were formed to boost home ownership in specific places.
Research no-down and low-down mortgages.
- 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 and moderate-income families get 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 by themselves, by offering mortgage insurance to private lenders.
Interest rates for an FHA loan are usually the market interest rate, but the down payment with an FHA mortgage are below those of conventional loans. The required down payment can go as low as three percent and the closing costs can be financed in the mortgage.
- 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 mortgage loans aren't actually financed by the VA, the office verfifies borrowers by issuing eligibility certificates.
- Piggy-back loans
You may finance a down payment using a second mortgage that closes along with the first. Generally the first mortgage covers 80% of the purchase amount and the "piggyback" is for 10%. Instead of the traditional 20 percent down payment, the buyer will just have to cover the remaining 10 percent.
- Carry-Back loans
In a "carry back" mortgage, the seller agrees to lend you some of his home equity to help you get your down payment money. You would borrow the majority of the purchase price from a traditional mortgage lending institution and borrow the remaining amount from the seller. Typically, this type of second mortgage has a higher rate of interest.
The satisfaction will be the same, no matter which method you use to put together your down payment. Your brand new home will be your reward!
Want to discuss down payments? Give us a call: (800) 299-0270.