Building Your Down Payment

Lots of buyers qualify for a loan, but they don't have a lot of cash to put up the standard down payment. Do you want to look into getting a new house, but aren't sure how to get together a down payment?

Cut expenses and save. Scrutinize your budget to discover extra money to save for your down payment. You also could enroll in an automatic savings plan to automatically have a set portion of your take-home pay moved into savings. You might look into some big expenses in your budget that you can give up, or reduce, at least temporarily. Here are a couple of examples: you may move into less expensive housing, or skip a family vacation.

Sell items you don't really need and find a part-time job. Perhaps you can get a second job and save your earnings. You can also get creative about the items you migh be able to put up for sale. Maybe you own desirable items you can sell at an auction website, or quality household items for a tag or garage sale. Also, you might want to think about selling any investments you own.

Borrow your down payment from your retirement plan. Research the specifics of your particular plan. It is possible to pull out funds from a 401(k) plan for you down payment or get a withdrawal from an IRA. You will need to ensure you are clear about any penalties, the way this may affect on income taxes, and repayment obligation.

Ask for help from family members. First-time buyers are often lucky enough to get down payment help from caring parents and other family members who are anxious to help them get into their own home. Your family members may be happy at the chance to help you reach the milestone of buying your own home.

Learn about housing finance agencies. Special mortgage loans are provided to homebuyers in certain situations, such as low income homebuyers or homebuyers looking to remodel homes in a targeted part of town, among others. Financing through a housing finance agency, you probably will receive a below market interest rate, down payment help and other benefits. Housing finance agencies may help you with a lower interest rate, help with your down payment, and provide other assistance. These non-profit programs were formed to boost the value of homes in particular places.

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

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), which functions as part of the U.S. Department of Housing and Urban Development (HUD), plays a significant part in helping low and moderate-income individuals get mortgages. An office of the U.S. Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA provides mortgage insurance to the private lenders, enabling homebuyers who might not be eligible for a typical mortgage, to obtain a mortgage. Interest rates for an FHA loan are normally the market interest rate, but the down payment amounts with an FHA mortgage will be less than those of conventional loans. Closing costs can be financed in the mortgage, while the down payment might be as low as 3% of the total.

  • VA mortgage loans

    VA loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can receive a VA loan, which typically offers a competitive rate of interest, no down payment, and minimal closing costs. While the mortgages are not actually provided by the VA, the department certifies applicants by issuing eligibility certificates.

  • Piggy-back loans

    You can fund a down payment using a second mortgage that closes with the first. Generally the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. In contrast to the usual 20 percent down payment, the homebuyer will just have to pull together the remaining 10 percent.

  • Carry-Back loans

    In a "carry back" mortgage, the seller agrees to loan you a piece of his home equity to help you with your down payment money. The buyer finances the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Generally, this kind of second mortgage will have a higher rate of interest.

The feeling of accomplishment will be the same, no matter which method you use to pull together the down payment. Your new home will be your reward!

Need to talk about the best options for down payments? Give us a call: (800) 299-0270.

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