Building Your Down Payment
Many folks who would like to buy a new house can easily qualify for several different kinds of mortgages, but they can't afford a large down payment. Want to look into getting a new home, but aren't sure how to get together your down payment?
Reduce expenses and save. Turn your budget inside out to discover extra money to go toward your down payment. Also, you can look into bank programs through which a portion of your take-home pay is automatically placed into a savings account every pay period. You would be wise to look into some big expenses in your spending history that you can give up, or trim, at least temporarily. Here are a couple of examples: you might decide to move into less expensive housing, or skip a family vacation.
Work a second job and sell things you do not need. Maybe you can get an additional job to get your down payment money. You can also get serious about the possessions you really need and the things you can sell. You might have desirable items you can put up for sale on an auction website, or household items for a tag or garage sale. You could also look into what your investments will sell for.
Borrow from your retirement plan. Investigate the parameters of your retirement plan. Many homebuyers get down payment money from withdrawing from IRAs or borrowing from their 401(k) programs. Make sure you know about any penalties, the effect this will have on income taxes, and repayment obligation.
Request a generous gift from family. First-time buyers are sometimes fortunate enough to receive help with their down payment help from thoughtful parents and other family members who may be able to help them get into their first home. Your family members may be inclined to help you reach the milestone of owning your first home.
Research housing finance agencies. These types of agencies provide special loan programs for low and moderate-income homebuyers, buyers interested in rehabilitating a home within a specific part of the city, and other specific types of buyers as specified by each agency. With the help of a housing finance agency, you can receive an interest rate that is below market, down payment help and other benefits. These types of agencies can help you with a reduced rate of interest, help with your down payment, and provide other advantages. These non-profit programs were formed to boost community in particular neighborhoods.
Explore no-down and low-down mortgage loan programs.
- Federal Housing Administration (FHA) mortgages
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a vital part in helping low to moderate-income buyers qualify for mortgage loans. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) aids individuals who need to get mortgages.
FHA helps first-time buyers and others who would not be able to qualify for a traditional loan by themselves, by providing mortgage insurance to the private lenders.
Interest rates with an FHA mortgage are generally the market interest rate, but the down payment amounts with an FHA mortgage are lower than those of conventional loans. The down payment can be as low as three percent while the closing costs could be packaged in the mortgage loan.
- VA mortgage loans
Guaranteed by the Department of Veterans Affairs, a VA loan assists veterens and service people. This special loan requires no down payment, has reduced closing costs, and provides the advantage of a competitive interest rate. While it's true that the mortgages aren't actually issued by the VA, the office verfifies borrowers by issuing eligibility certificates.
- Piggy-back loans
A piggy-back loan is a second mortgage that you close with the first. Usually the first mortgage is for 80% of the purchase amount and the "piggyback" funds 10%. Rather than the usual 20 percent down payment, the homebuyer just has to pull together the remaining 10 percent.
- Carry-Back loans
With a carry-back mortgage, the you borrow a portion of the seller's home equity.. In this scenario, you would finance the majority of the purchase price with a traditional mortgage lending institution and borrow the remaining amount from the seller. Typically you will pay a slightly higher interest rate with the loan from the seller.
No matter your method of putting together down payment money, the satisfaction of owning your own home will be just as great!
Need to talk about down payments? Give us a call at (888) 299-4585.